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Choosing a Private Credit Lender Wisely

Are you choosing your private credit lender wisely? Discover what to ask to ensure you aren’t taken to the cleaners by your private credit provider.

Private Credit: A Guide to Choosing Your Lender Wisely

In recent years, the private credit industry has emerged as a beacon for those seeking alternatives to traditional bank loans. With its promise of greater flexibility and speed, private lending has attracted many borrowers, from individuals to institutional investors. However, this burgeoning market has not been without its challenges. As the International Monetary Fund (IMF) highlighted in its Global Financial Stability Report of April 2024, the private credit market is in need of “more vigilant regulation and supervision” to safeguard its integrity and protect lenders from potential vulnerabilities.

Important Considerations When Choosing a Private Credit Provider

As the private credit sector evolves, lenders and borrowers must tread carefully and exercise due diligence to ensure they engage with reputable, ethical, and transparent credit providers. Here are the essential considerations and questions we recommend to guide you through the process of choosing a private credit provider that aligns with your financial goals and needs safely.

Licensing and Registration: Your First Line of Defence.

Before entering into any agreement, verify the provider’s credentials. Ensure they hold an Australian Credit License (ACL) or an Australian Financial Services (AFS) Licence. Licensing is a fundamental requirement that signifies the lender’s adherence to the legal and regulatory frameworks designed to protect consumers.

The Importance of AFCA Registration

Registration with the Australian Financial Complaints Authority (AFCA) provides an additional safety net, offering a pathway for dispute resolution, should there be a need. Engaging with a lender registered with AFCA ensures you have recourse when the service or conduct falls short of expectations.

Transparent Financing Sources and Solid Track Records

Understanding where your lender sources its funds can provide insights into its stability and ethical standing. Furthermore, a lender with a documented history of fulfilling its loan commitments indicates reliability and trustworthiness.

Expertise and Due Diligence

Reviewing a lender’s length of operation and market experience can tell you whether they have historically been a good provider or not. While seemingly cumbersome, a rigorous due diligence process is a positive indicator. It shows that the lender is committed to responsibly assessing loan suitability and minimising risks for all parties involved.

Financial Hardship Practices

Life is unpredictable, and financial hardship can affect anyone. Ask about the lender’s policies regarding financial hardship and how they address loan defaults. An ethical lender will seek to work with clients rather than resort to punitive measures immediately.

Avoiding the Traps

Beware of lenders recommending dubious practices, such as setting up a company name for personal loans. Such proposals not only contravene regulations but strip away the protections they afford you.

The Role of Financial Advisors and Brokers

If you need more clarification about navigating the private credit landscape, consider engaging the services of a financial advisor or broker. These professionals can be invaluable in steering you toward reputable lenders and ensuring that your financial needs are met responsibly and ethically.

Why Choose Australian Securities

In a marketplace that demands vigilance, Australian Securities presents a bastion of integrity and reliability. Our heritage, spanning nearly a century since our inception in 1925, is a testament to our commitment to ethical lending and intelligent investing. Licensed and future-facing, we embody the principles of effective oversight and proactive management.

Navigating Regulatory Evolution and Its Impact

As the regulatory environment surrounding private credit tightens in response to calls for increased oversight, Australian Securities is committed to proactive adaptation and unwavering ethical adherence. This positions us to be ready to navigate and thrive within the evolving regulatory requirements. For our borrowers, this means they are partnering with a lender that is committed to compliance and also dedicated to fair, transparent lending practices that safeguard client’s interests.

It’s better not to chance it

In the sea of private credit options, equipping yourself with knowledge and asking the right questions is critical to identifying providers that value transparency, integrity, and ethical practices. In choosing a lender like Australian Securities, you align yourself with a partner dedicated not just to financial gains but to fostering trust and long-term success in Australia’s vibrant financial landscape.

Whether you are looking for a tailored mortgage loan, a complex loan, or to refinance your clients, Australian Securities has you covered. Our Finance team will work closely with you to create a loan that meets your needs.

Still not sure…

Call us at 1300 275 275 to talk to one of our finance managers or lending executives. We prioritise direct communication and personalised support for our clients.

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