Selecting the right lender
Selecting the right lender isn’t an easy task. It might seem tempting to think that all are reliable, properly funded and legit. But can you be sure of that? There are pros and cons of private lenders that you should consider before applying for a loan.
There are some things you would expect of a reliable lender that should give you the confidence and reassurance that you’re collaborating with a responsible organisation. Apart from supplying a variety of financial offers, a lender should be entirely upfront and transparent with fees and rates, while providing excellent services.
Unfortunately, most lenders’ marketing strategies focus almost entirely on advertising the most convenient interest rates. That’s why many Aussies look exclusively for the best rate alone, overlooking other aspects. Still, note that the lender that supplies the cheapest rate available doesn’t necessarily facilitate the best overall option for your needs.
As a consumer, you should look beyond a lender’s marketing strategy and choose a lender that considers your needs and has convenient loan offers.
On that note, today we will talk about private lenders vs. banks. Which one is better? What are the pros and cons of choosing private lenders over a bank? This article aims at answering these questions.
Introducing Private Lenders
Who are private lenders and what can they offer you? Private lenders do not hold a banking license. They are not a credit union, nor are they a bank.
The great number of private lenders out there competing against one another could make it challenging for you to find the right one. You shouldn’t make a hasty decision, as alluring as an offer could be, at first glance. This applies when it comes to both banks and private lenders.
The Pros of Private Lenders
- They provide very competitive rates. In comparison with traditional banks, they facilitate more convenient loan offers.
- Typically, they have low ongoing and setup costs.
- Lending criteria are less rigid. Hence, if your credit rating isn’t the best, a private lender might give you a better offer than a traditional bank.
- They embrace flexibility in the sense that they aim at meeting your specific requirements and needs.
- Expect a more personalised customer support service. Private lenders also deliver a large niche of loan offers to meet various circumstances. Banks offer slow and often impersonal service.
The Cons of Private Lenders
Non-bank lenders tend to be more vulnerable to altering economic conditions. For instance, when the Global Financial Crisis hit, a range of lenders had to withdraw from the financial market.
Apart from that, some private lenders have a limited service offer. However, that depends on each lender, which is why it’s always best to do your homework before you sign a deal.
Are Private Lenders Reliable?
Private lenders and banks must abide by the same laws, regulations, and rules. For example, Private Lenders must abide by the Consumer Credit Code. This code governs all credit transactions that take place in Australia.
The code implies that credit providers including banks, private lenders, credit unions, finance companies, and businesses have an obligation to communicate both your rights and responsibilities when you take out a loan of any kind.
What is more, credit providers must transparently disclose relevant information regarding your agreement in a detailed, written contract. The contract should state information about fees, commissions, interest rates, and others that, in the past, have been omitted.
In the same respect, the Australian Securities and Investment Commission requires lenders to be transparent about rates and fees.
When you select a lender, it’s comforting to know that you are protected when it comes to making a significant financial transaction.
A lender should be entirely upfront regarding its fees. If you feel that you cannot trust your lender, then this raises a big question mark.
The Bottom Line
Choosing a private lender over a bank has its advantages and disadvantages. Since you’re armed with the information you needed to make the right decision, now it’s up to you to weigh the elements presented in this article.
If you’re unsure of the lender you should choose, contact us for a free consultation and about what we can offer you. We are entirely transparent regarding our rates and fees, as honest communication is the key to a fruitful collaboration. Apart from carefully selecting your lender, ensure that you don’t make a hasty decision when it comes to the terms of your loan.