Private Loans and Bridging Finance: When They Make Sense

Private lending fills the gap when a bank can’t move fast enough or won’t lend at all. It costs more than bank finance, so it isn’t the answer to every problem, but used well it can save a deal, settle a purchase on time or clear a pressing debt while a longer-term solution is put in place.

What is a private loan?

A private loan is funding from a private lender or fund rather than a bank, usually secured by a first or second mortgage over property. Terms are short, typically from 1 to 24 months, and lenders focus mainly on the security and your plan to repay, rather than full financials.

What is bridging finance?

Bridging finance is a short-term loan that covers the gap between two events, most commonly buying a new property before you’ve sold an existing one. Private lenders, non-banks and some banks offer it, and the right choice depends on how certain and how quick your sale will be.

When private lending makes sense

• Speed: settling a purchase or auction when a bank approval won’t arrive in time
• Bridging: buying before selling
• Urgent debts: clearing an ATO debt, a default or a creditor demand. See business loans with ATO debt.
• Short-term working capital against property while a larger deal settles
• Complex situations a bank won’t assess, such as a recent credit issue or incomplete financials

What it costs

Expect interest rates well above bank rates, plus an establishment fee and legal costs. Interest is often prepaid or capitalised, meaning it’s added to the loan instead of paid monthly. Ask for the total cost over the expected term, not just the rate, and check the default rate and any early repayment terms.

The exit strategy matters most

Every private loan should have a clear, realistic plan for how it will be repaid. The most common exits are:

• Sale of a property
• Refinance to a bank or non-bank once the issue is resolved or financials are lodged
• A known payment, such as a settlement, contract payment or asset sale

How a broker helps

Private lenders vary widely in pricing, fees, LVRs and how they treat second mortgages. We compare private lenders and funds on our panel, check the total cost, and plan the refinance out of private money from day one so you aren’t paying higher rates for longer than you need to. Read more about our private lending options and debt advisory.

Frequently asked questions

How fast can a private loan settle?

Often within days to a couple of weeks, depending on the valuation, the security and how quickly legal documents are signed. That’s usually much faster than a bank.

Can private lenders fund personal purposes?

Generally no. Private lenders in this space usually lend only for business or investment purposes, and you’ll normally be asked to sign a declaration confirming that.

What is an exit strategy?

It’s how the loan will be repaid at the end of the term, usually by selling a property, refinancing to a bank or non-bank, or receiving a known payment. Private lenders look closely at it before approving.

This article is general information only and doesn’t take into account your objectives, financial situation or needs. Speak to us or your accountant before making a decision.