10 questions brokers should ask private lenders

September 5, 2023
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10 questions brokers should ask private lenders

Using a private lender for your clients’ funding should be fairly straightforward if you know what to look out for and provided your lender is worth their salt. But there are a whole lot of private lenders out there, and they’re definitely not all cut from the same cloth.

So here – in no particular order – are ten questions brokers should have front-of-mind when choosing a lender for a loan.

Are they regulated?

Being ASIC-regulated isn’t mandatory for private lenders in Australia – but it’s a pretty good yardstick of a decent, trustworthy lender. A lender that’s ASIC-regulated, like SWMM, has committed to a certain level of compliance standards and procedures. You’ll also benefit from a legal and dispute resource if need be this is Australian Financial Complaints Authority. If the company is non-ASIC regulated and not a member of the AFCA dispute resolution scheme, it’s much more difficult if something goes wrong.

Are the fees transparent?

A good broker should look at a lot more than just the interest rate of the loan. A lower interest rate is fine – but there are lots of different fees to consider. So it’s crucial to look out for hidden costs and fees. We give upfront fees, so everything is crystal clear.

How quickly can they get the finance?

So you’ve chosen a lender who’s offering a good rate on paper. But how long is it going to take, and how many hoops are you going to have to jump through to get it? Don’t forget to ask about this, as there’s nothing worse than a process that drags out for weeks or even months, with screeds of paperwork and changing goalposts. We commit to 72 hours, which is almost unheard of in the industry.

What happens if the client defaults on the loan?

Are they the kind of lenders who will jump straight to litigation if the worst happens and the loan defaults? Or are they going to talk to someone, lend a hand, and be human about it?

Are they flexible?

You probably don’t want a lender who sticks rigidly to one basic loan offering. Can it be flexed to suit your client’s individual requirements? For example, can you pay off the loan early without huge fees, and is there flexibility around interest rates and repayments? Rather than one-size-fits-all, you’ll want something more bespoke.

Is the business well-established?

A new lender may be absolutely fine – but it’s more of a risk. So how long have they been going for? Do they have a registered business address, not just a PO Box? A landline rather than just a mobile number? A business that’s been going for many years is more likely to be a reliable lender.

Do they have a solid reputation?

The last thing you want is to deal with a dodgy or difficult lender. So check them out – ask around among people you trust in the industry. Have a snoop through their Google reviews. Search for any poor press to winkle out the bad guys before you come a cropper. And don’t just focus on the company, scrutinise the directors and the Board, too.

Is the funding secure?

You probably also want to understand where the funding is sourced from. Do you have clarity on the parties behind the lender, and where the investment is coming from? If you don’t, it’s a good idea to dig a little deeper.

How is their customer service?

Choosing a lender who delivers an efficient, helpful and friendly service can be worth every bit as much as a low interest rate. Poor customer service is the pits, in any business scenario. It’s frustrating, time-consuming, feels chaotic and it just makes everything that bit more difficult. Worse still, it can make you look bad to your borrower, too.

Does it sound too good to be true?

Then it probably is. Read the small print and do all your due diligence before you sign on the dotted line. More often than not, I hear of brokers who hastily push a loan because the rate looks good without digging down to find there are fees upon fees upon fees loaded up on top. Often these low rate lenders have aggressive inflexibility on late payments that prove extraordinarily costly. A reasonable private lender will have some leniency in their deadlines.

In short…

No broker wants a deal to go sour. It can reflect poorly on you, damage your reputation and mean you lose clients, as well as causing potential financial and legal implications. But if you bear all these factors in mind, and ask the hard questions, you shouldn’t go far wrong.

Contact Damien if you have a loan that needs a regulated, fair, fast private lender.

Delivering timely capital to borrowers, and reliable returns to investors.

Sydney Wyde is a well-credentialed private mortgage lender with a proven track record spanning almost 20 years.