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What Interest Rates Do Private Lenders Charge?

Private lending has become a critical funding solution for borrowers who need fast, flexible access to capital. Unlike banks, where rates are rigid but approvals are slow, private lending provides a tailored solution based on the borrower’s equity and exit strategy.

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At Innovate Funding, our rates are transparent and competitive in the private lending market. While private loans typically carry higher rates than banks, they are designed to meet urgent timelines and complex scenarios where bank finance is unavailable.

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Typical Interest Rates in Private Lending

Interest rates in private lending vary depending on several key factors. Broadly, borrowers can expect:

These rates reflect the speed, flexibility, and risk profile of private lending.

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How Rates Are Determined

Private lending rates are influenced by:

  • Loan-to-Value Ratio (LVR): lower LVRs generally attract better rates. For example, a 50% LVR first mortgage is likely to be priced lower than a 70% LVR.

  • Security Type: residential properties in metro areas typically attract lower rates than specialised commercial or regional properties.

  • Loan Position: first mortgages carry lower risk (and therefore lower rates) than second mortgages.

  • Loan Term: shorter loans often have lower overall cost, while longer loans carry higher pricing.

  • Exit Strategy: a clear and achievable exit, such as an imminent property sale or bank refinance, supports better pricing.

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Fees to Expect Alongside Interest

In addition to the interest rate, private lending usually involves:

  • Establishment Fees – generally 2% to 3% of the loan amount, capitalised into the loan

  • Brokerage Fees – depending on the referral source, typically 1% to 2% plus GST

  • Legal Fees – charged by the lender’s solicitor, usually a fixed estimate provided upfront

  • Valuation Costs – where required to confirm security value

At Innovate Funding, all fees are disclosed upfront to ensure borrowers understand the true cost of the loan before proceeding.

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Why Private Lending Rates Are Higher Than Banks

Private loans are designed for scenarios where speed, flexibility, and access are more important than headline rates. While bank loans may be cheaper, they often take months to approve and require extensive documentation.

Innovate Funding’s private loans are:

  • NCCP-exempt and available only for business or investment purposes

  • No-doc loans requiring only ID, council rates notice, and existing loan statements

  • Settled in days, not months

  • Tailored to borrowers who may not meet traditional lending criteria

The slightly higher rate reflects the value of fast access to capital and the ability to secure opportunities that banks cannot service in time.

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Private Lending in Australia

Sydney

A developer in Parramatta required a short-term loan to complete construction. Innovate Funding arranged a first mortgage at 9.25% per annum, settled within five business days. The loan was repaid six months later when the project refinanced to a mainstream lender.

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Melbourne

An investor in Geelong needed bridging finance to settle a property while waiting for bank approval. Innovate Funding provided a bridging loan at 10.5% per annum, secured against the property with a 60% LVR.

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Brisbane

A business owner in South Brisbane used a second mortgage to pay ATO debts. Innovate Funding funded a second mortgage at 13.25% per annum, secured against an investment property. The loan was refinanced after nine months.

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Perth

A Perth developer purchased land in Joondalup using a first mortgage loan at 9% per annum. The loan was repaid within 12 months after completing construction and refinancing.

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Adelaide

An Adelaide investor obtained a second mortgage at 12.95% per annum to unlock equity in a Glenelg property for a small unit development. The loan was cleared on sale of the completed units.

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Why Borrowers Accept Higher Rates

Borrowers choose private lending because the benefits outweigh the higher cost of capital. Key reasons include:

  • Fast access to funds when bank finance is too slow

  • Ability to settle property purchases in tight timeframes

  • Unlocking equity for development or business purposes

  • Flexible approvals based on asset value rather than credit history

  • Short loan terms where interest costs are outweighed by the profit opportunity

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Innovate Funding’s Advantage

At Innovate Funding, we focus on providing:

  • Transparent interest rates starting from 8.75% p.a. for first mortgages

  • No-doc loans based on asset viability

  • NCCP-exempt structures for business and investment purposes

  • Fast approvals and settlements across Australia

  • National coverage with deep local market knowledge

We ensure every borrower understands their costs upfront and has a clear, achievable exit strategy.

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