businessOwned by: ASX Listed
monetization_onFunded by: Institutional funding and wholesale capital markets
securityLMI Provider: Self-Insured
account_balanceLender type: Non-Bank, Specialist Lender, Wholesale Lender
Pepper Money is Australia’s leading specialist lender both through mortgage brokers and as a wholesale funder for many non-bank lenders. They’ve won multiple awards, expanded into car loans and even expanded internationally to Europe and Asia.
Specialist lending used to be about lending to people with a bad credit history or who cannot prove their income. However, these days, specialist lending is about helping anyone who is a good borrower but isn’t being helped by the banks or declined by the LMI providers.
How do Pepper’s home loans compare?
They’re great at
- Beating the other specialist lenders on interest rates and fees
- Special solutions for borrowers with bad credit
- Low doc loans
- Rolling all of your debts into your home loan
- Customer service
- Very efficient systems and processes
- Fast loan approvals
- Assessing loans using common sense instead of credit scoring
- They’re innovative and are always looking for ways to help more customers
- Their lending policy is flexible and, if you’re a good borrower, they’ll approve your loan
- Working with mortgage brokers
But they’ve got some drawbacks…
- Much higher interest rates than the major banks
- Their risk fee, similar to LMI, can be large
- They’re less likely to help with remote or large properties
- Conservative when assessing how much you can borrow
- No branch access
- They don’t offer construction as an option on all of their home loans
- Fixed rates unavailable
Is Pepper reputable?
Pepper is usually our first choice of the specialist lenders if a bank cannot help one of our customers.
They’re ethical, efficient and have fair pricing that enables borrowers to buy a home or refinance even if they’ve been let down by other lenders.
A specialist loan is only step 1
Your mortgage broker’s job isn’t over when you get approved for a specialist loan. They should have a plan in place to refinance your loan in 2 – 3 years’ time to get you to an even better interest rate.
We normally look at how long it will be until you have a clear credit history or sufficient income evidence to qualify for a lower interest rate. Then we set a reminder and follow up on that date.
The great news is that Pepper has a range of prime home loans as well so you can actually refinance internally without too much hassle. You get a great interest rate, without too much paperwork.
What home loans types do they have?
Pepper has three main home loans and a variation for each depending on if you can prove your income or not.
Pepper Essentials is a prime loan for people with a clear credit history and who can either qualify with a bank or just falls outside of a bank’s lending criteria.
Pepper Easy is a near prime loans designed for people who have some blemishes on their credit file. Typically these borrowers are well outside of bank lending criteria.
Pepper Advantage is a specialist loan for people with serious credit impairment. It has a higher interest rate but it tends to be much more competitive than other specialist lenders.
On all of Pepper’s loans, you have the choice of Full Doc if you can prove your income with payslips or tax returns and Alt Doc if you are self-employed and can provide alternative proof of your income such as BAS, bank statements or an accountant’s letter.
Tips for applying with Pepper
Some mortgage brokers refuse to deal with specialist lenders! This comes from ignorance rather than any logical reason, or because that mortgage broker used to work for a bank and still has a bank mentality.
So find a mortgage broker who is a specialist in non-conforming lenders and you can be sure you’re getting the right lender and the best possible interest rate.
This is where we can help. Call us on 1300 889 743 or complete our free assessment form online and we’ll let you know if Pepper or another specialist lender is suitable for you.
Non-bank lender or investment bank?
During the GFC, Pepper took a new direction that we didn’t expect. Many of their competitors faced insolvency during the crisis and Pepper then swooped in and acquired their business or took over as the manager of their loan book.
Then Pepper went on an international spending spree that included an Irish Bank, a Korean Bank, a Spanish loan book and a Hong Kong Personal Loan business before returning to Australia to buy Citibank’s commercial loan book and Suncorp’s equipment finance loan book. Most of these acquisitions were at a significant discount.
They’re not just a good specialist lender, they’re also a smart investor.
Reviews from confused customers
Pepper took over the loan books for many of its competitors during the GFC but this had one problematic side effect.
Their competitors such as GE Money, Mobius and Seiza all faced financial trouble and put up their customer’s interest rates. This didn’t sit too well with customers, and after Pepper took over managing their loans they blamed Pepper for having a higher interest rate.
Some of them posted nasty reviews online blaming Pepper for something that was really someone else’s fault.
Pepper Money client story: Charnel, Vic
- To pay out part 9 debt agreement with current lender.
After falling on hard times, Charnel took out a personal loan just to make ends meet as a single mum, keep paying her mortgage repayments and avoid declaring bankruptcy.
As the bills kept mounting up, she soon found herself defaulting on the personal loan and eventually made the tough decision to enter into a debt agreement with her creditor just so she could keep her home.
She knew she needed to pay out the debt agreement so she could avoid bankruptcy.
The interest rate is around 14-16%, around the same rate as a personal loan.
Charnel spent close to a year on the debt agreement before she sought help from a mortgage broker.
Very few lenders will accept someone with a debt agreement on their credit file but some specialist lenders will if you’re borrowing under 80% of the property value.
The variable rate was around 7.08% compared to more than 8% for the other non-conforming lenders. It’s also much cheaper than the 14-16% she was paying for her personal loan.
Charnel even had enough equity left over in her property to cash out $20,000 for renovations to her home.
If she can make perfect repayments for the next 12 months, she’s in a position to refinance back to a prime lender.
Compare Pepper Home Loans to other lenders
Not sure which lender is right for you? Our Home Loan Experts can help!
Talk to one of our mortgage brokers by calling us on 1300 889 743 or complete our free assessment form.