What Are the Interest Rates for Private Loans by Private Lenders in Australia? (2025 Update)

Sep 24, 2025
5 min read

Updated: Feb 2

With major banks tightening lending criteria and extending approval timelines, private lenders have become a crucial funding alternative in 2025. This is especially true for borrowers who require speed, flexibility, or more tailored solutions.

But one of the most common questions we’re asked at Innovate Funding is:

"What are the interest rates for private loans?"

The short answer: it depends on the type of loan, the security offered, the risk profile, and the timeframe. Interest rates typically range from 8% to 14% p.a. for secured loans, and 18% to 24%+ for unsecured business lending. These rates reflect the higher level of flexibility and faster access to capital offered by private lenders.

In this article, we’ll provide an up-to-date overview of private lending rates in Australia, the factors that influence them, and practical insights to help you secure the most suitable terms for your situation.

Understanding Private Loans

A private loan is a short-term funding facility provided by a non-bank lender. This typically involves individual investors, mortgage funds, or boutique lending firms. Unlike traditional bank finance, private loans cater to borrowers who:

Need funds within days, not weeks
Don’t meet traditional credit criteria
Seek tailored loan structures
Require flexible documentation and underwriting

At Innovate Funding, we specialise in connecting clients with trusted private lenders across Australia for various needs, including:

Private Lending Rates in 2025: What Are the Interest Rates for Private Loans?

The following table reflects realistic rate ranges based on current market conditions and actual deals funded through Innovate Funding in 2025:

Loan Type	Interest Rate (p.a.)	Term
Bridging Loan (1st Mortgage)	8.75% - 12.95%	3 – 12 months
Property Acquisition	8.75% – 12.95%	3 – 18 months
Second Mortgage	1.25% - 2.5% per month	3 – 12 months
Construction Top-Up	12%-18%	3 – 12 months
Unsecured Business Loan	18% – 24%+	3 – 9 months

These are indicative ranges. Actual rates are determined by loan size, LVR, asset type, location, borrower profile, and exit strategy.

Why Are Private Lending Rates Higher Than Bank Rates?

Private lenders operate outside the rigid structures of traditional banks. They provide fast, flexible capital solutions for borrowers who don’t have the luxury of time or the ability to meet traditional lending criteria.

You are paying for:

Speed (loans can be settled in days)
Flexibility (non-standard structures)
Customisation (tailored to the deal)

In many cases, the higher cost is justified by the opportunity or problem the funding solves. This could be securing a high-return investment, avoiding default, or unlocking equity at short notice.

Real-World Scenarios from Innovate Funding

Here are three recent examples of private loans funded through Innovate Funding:

Bridging Finance for Residential Downsizing

Loan Amount: $1.6M
Security: First mortgage, Sydney
LVR: 60%
Rate: 9.25% p.a. (prepaid)
Purpose: Settlement of new property prior to sale of existing home

Second Mortgage for Development Cost Overruns

Loan Amount: $750K
Security: Second mortgage, townhouse site in SE QLD
LVR: 72%
Rate: 14.5% p.a.
Purpose: Fund variations and ensure project completion

Unsecured Business Loan for ATO Debt Payout

Loan Amount: $300K
Security: Unsecured
Rate: 22.75% p.a.
Term: 6 months
Purpose: Settle tax obligations and maintain business operations

Each of these transactions was completed within a matter of days, significantly faster than any traditional lender could facilitate.

Key Factors That Influence Your Interest Rate

Private lenders assess pricing on a case-by-case basis. However, several consistent factors influence the rate you're likely to be offered:

1. Loan-to-Value Ratio (LVR)

A lower LVR equals lower risk and better pricing. Most first mortgage loans at or below 65% LVR attract more competitive rates.

2. Security Type and Location

Metro residential and commercial properties are favoured. Regional, specialised, or vacant assets may attract higher pricing.

3. Borrower Profile

Private lenders are more flexible with credit history but still assess:

Track record such as development or property experience
Asset position and current liabilities
Business financials, where relevant

4. Loan Purpose

Funding for income-generating or growth opportunities generally attracts better pricing than loans used to resolve financial distress.

5. Exit Strategy

A clearly defined and realistic exit, such as a refinance, property sale, or project completion, improves lender confidence and lowers perceived risk.

Are Private Lending Rates Negotiable?

Yes, particularly if your deal is well-structured, low-risk, and supported by quality security. At Innovate Funding, we structure transactions to highlight strengths, mitigate risks, and present proposals in a lender-friendly format. This ensures you’re in the best position to negotiate favourable terms.

Lenders are more likely to offer sharper rates when they receive:

A complete loan summary with financials and valuations
Strong documentation and security information
A realistic exit plan with a clearly defined timeline

Private Lending vs Bank Lending: At a Glance

Feature	Private Lender	Traditional Bank
Approval Time	24 – 72 hours	3 – 8 weeks
Credit Score Requirements	Flexible	Strict
Security Requirements	Case-by-case	Conservative
Loan Structure	Customised	Standardised
Documentation Required	Minimal	Extensive

Private loans are ideal for borrowers who value fast decision-making and flexible structuring. This is particularly true when timing or complexity makes traditional lending unsuitable.

When Paying a Higher Interest Rate Makes Sense

The true value of private finance lies not in the rate itself, but in the opportunity it creates or the problem it solves. Examples include:

Securing a property before another buyer steps in
Keeping a development project on track
Preventing default or penalty interest with urgent funding
Bridging a gap between sale and settlement

If the upside of taking action outweighs the cost of capital, private lending is often a strategic and commercially sound solution.

How to Secure a Competitive Private Loan

Work with a Specialist

Private lending is not a one-size-fits-all market. At Innovate Funding, we tailor loan strategies to suit each borrower’s needs and match them with the right lenders.

Prepare Strong Supporting Documents

Even private lenders require key documents such as valuations, a loan summary, security details, and a clearly defined exit plan.

Keep LVR Sensible

Loans below 70% LVR are generally priced more favourably.

Be Transparent

Disclose all relevant information upfront. Full transparency builds trust and increases the likelihood of securing favourable terms.

Final Thoughts

Private lending continues to play an essential role in Australia’s commercial and investment finance ecosystem in 2025. While interest rates are higher than traditional bank loans, they reflect the speed, flexibility, and problem-solving nature of the funding.

When used strategically, private finance can unlock opportunity, resolve cash flow pressure, or help secure an otherwise out-of-reach investment.

At Innovate Funding, we help clients structure deals properly, access suitable lenders, and secure funding with confidence.