Why are private lending rates higher than bank rates?

Private lending rates reflect several factors that banks don't face: shorter loan terms (1–24 months vs 25–30 years), higher lender risk (private lenders often accept borrowers banks decline), smaller loan books (less diversification of risk), and the speed and flexibility of the service. The higher rate compensates for these factors — it's the cost of access, not a penalty.

Can I negotiate my private lending rate?

Yes, particularly on larger loans ($500,000+) and where your LVR is low. The rate is not fixed — it's individually priced based on your deal's risk profile. Your broker should be negotiating on your behalf as standard practice. Establishment fees are also negotiable.

What is the cheapest private lending product?

First mortgages at low LVR (under 50%) on metropolitan residential property offer the lowest rates — from approximately 8.75% p.a. in the current market. Bridging loans can also be competitive at 0.89%–1.5% p.m. for strong applications with clear exits.

How do I compare private lending offers fairly?

Compare total borrowing cost, not just the interest rate. Add up the interest over the full term plus all fees (establishment, legal, valuation, discharge). A loan with a higher rate but lower fees can be cheaper overall. Your broker should present this comparison in dollar terms.

Do rates change during the loan term?

Most private loans have a fixed rate for the agreed term. Unlike variable-rate bank loans, the rate you agree at settlement is the rate you pay for the duration. Some lenders offer an extension at a revised rate if you need more time, but this is renegotiated — not an automatic adjustment.

What rate can I expect with bad credit?

Borrowers with credit impairments typically pay a premium of 1%–3% above standard rates. For example, a standard first mortgage might be 9.5% p.a., while a bad credit first mortgage could be 11%–13% p.a. The premium reflects the additional risk and decreases as the credit event ages and your equity position strengthens.

top of page

Call 02 8919 3639

Private Lending Rates in Australia Explained: What Drives the Cost and How to Get a Better Deal

Nov 10, 2023
1 min read

Updated: Apr 15

Private lending rates in Australia typically range from 6% to 15% per annum, depending on the loan-to-value ratio (LVR), property type, loan purpose, exit strategy, and borrower profile. This guide explains the key drivers of private lending costs and how to negotiate better rates.

Private Lending Rates in Australia Explained: What Drives the Cost and How to Get a Better Deal

Recent Posts

Get in Touch