Alternative lender’s near prime settlements grow by more than 50%

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    Amidst the tighter lending conditions that have beset much of the mainstream banking industry, Pepper Money says it’s having its best year yet across its entire product suite, particularly in the near prime space.

    Since pioneering and launching the near prime segment in 2012, Pepper Money has experienced an average growth rate of 30% per year in near prime settlements and has served over 11,600 customers equating to more than $5bn-worth of loan settlements.

    “To put the $5bn worth of near prime settlements into context, 56%, or $2.6bn, has been originated in the last 18 months,” Pepper Money CEO Australia Mario Rehayem said. “Near prime is finally getting the recognition it deserves.”

    According to Rehayem, many near prime customers would have been financed willingly by a bank 12 months ago. These customers could be people who have a number of credit cards that they’re finding difficult to repay; people who participate in the gig economy; people who don’t hold full-time employment or maintain supplementary income; or people who have overcome a credit debt and want to move forward.

    In an interview with MPA, Pepper Money director of sales Aaron Milburn said that interest from brokers working with near-prime borrowers continues to grow as traditional lenders tighten their lending criteria in all aspects of prime lending.

    “It helps to think of the near prime category as an elastic band that expands and contracts depending on internal and external factors,” he said. “A bank’s changing risk appetite or an industry-wide regulatory change are good examples of these factors.”

    How brokers can deal with near prime
    The application process for a full-doc near prime loan is no different to a full-doc prime loan, according to Milburn. The challenge is managing their customer’s expectations.

    Some customers may experience a sense of disappointment because they didn’t expect to be declined by a bank, so brokers need to be sensitive to those feelings, Milburn said.

    Pepper Money has a five-step process that outlines how brokers can approach these situations and explain that they have an alternative solution that will still meet their client’s need.

    For just the month of August, Pepper Money is offering a 50% discount on its mortgage risk fee– its equivalent of LMI— to celebrate its milestone in the near prime segment.

    “It represents significant savings for those underserved families trying to refinance or get into the market at a time when the mainstream lenders are tightening their lending criteria more than ever before,” Milburn said.

    This article was written in partnership with Pepper Money.

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