Private loans in Australia: the non-bank lending landscape

How private lending is organised in Australia

Consumer credit is governed by the National Consumer Credit Protection Act 2009 and its National Credit Code, which does not distinguish between banks and fintechs: any business providing credit for personal, domestic or household purposes must hold a licence and follow responsible lending rules.

That single framework explains why the market looks orderly. Non-bank lenders, finance brokers, buy now pay later providers and online platforms all sit under the same regulator, and every licensee must belong to the Australian Financial Complaints Authority for free dispute resolution.

ASIC licensing and what it means for borrowers

The Australian Securities and Investments Commission issues Australian Credit Licences and publishes them on its professional register. Before signing anything, borrowers can search the lender's name or licence number. A business quoting no licence number at all should not be lending to consumers in Australia.

Licensees must make reasonable inquiries about income and expenses, verify them, and assess whether the loan is unsuitable. In practice this means bank statements, payslips and a credit report check through Equifax, Experian or illion. Comprehensive credit reporting now records repayment history, not only defaults.

Marketplace lending: from peer-to-peer to fintech lenders

Australia briefly had a genuine peer-to-peer sector in the 2010s. Platforms such as Plenti, formerly RateSetter, and Harmoney matched retail investors with borrowers. Both have since shifted mostly to institutional funding, but they remain licensed online lenders offering risk-based fixed-rate personal loans.

For borrowers the difference is small: the platform is still the credit provider or its agent, holds the licence, runs the credit assessment and handles hardship requests. Rates are priced by credit score, so a strong file often beats a big bank's standard unsecured rate.

Customer-owned banks and credit unions

Credit unions and mutual banks are authorised deposit-taking institutions supervised by APRA, so deposits enjoy the Financial Claims Scheme. Many began as workplace or regional cooperatives, for example for teachers, police or health workers, and still lend to members on community-oriented terms.

Their rates are usually competitive, fees modest and hardship teams flexible. Membership is normally open to anyone after a small share purchase, although some keep a link to a profession or region. Approval still depends on the same responsible lending assessment.

Small amount credit contracts and cost caps

Payday-style loans are called small amount credit contracts, covering up to 2,000 dollars for terms between 16 days and one year. Lenders may charge a one-off establishment fee of at most 20 percent of the amount borrowed plus a monthly fee capped at 4 percent.

Medium amount contracts between 2,001 and 5,000 dollars face a different ceiling: an annual cost rate of 48 percent plus a 400 dollar fee. Most other consumer credit from non-exempt lenders is also capped at a 48 percent annual cost rate, including interest and fees.

What these caps mean in real dollars

A 1,000 dollar small amount loan repaid over six months can legally cost 200 dollars in establishment fees plus 240 dollars in monthly fees. That is 440 dollars of charges, far above any bank loan, although the contract is fully lawful.

ASIC has repeatedly found lenders falling short on these obligations, including unsuitable loans to people relying on Centrelink payments. Its reports are worth reading, and No Interest Loan Scheme loans of up to 2,000 dollars remain a cheaper alternative for essentials.

Family loans and the law

Lending to relatives without charging as a business does not require a credit licence, because the credit code covers credit provided in the course of a business. A family loan is therefore a private contract, enforceable like any other debt if it is properly documented.

A written agreement should record the amount, schedule, any interest and what happens on death, separation or a property sale. Family lawyers often see disputes where parents' contributions to a home deposit were never documented as a loan, leaving them treated as a gift.

Tax and Centrelink treatment of family loans

Interest a family lender receives is assessable income for the Australian Taxation Office, even if the rate is modest. Interest-free loans generally create no tax for the borrower, but the lender should keep records proving that the money was lent rather than given away.

For older lenders, Centrelink matters: a loan to a child counts as a financial asset subject to deeming for Age Pension income tests, while forgiving it may be treated as a gift beyond the annual gifting free area. Services Australia publishes the current thresholds.

Which option suits which borrower

Borrowers with a stable job and clean report usually get the best price from a mutual bank or risk-based online lender. People with irregular income or past defaults should compare a secured car loan or no interest loan before small amount credit.

Self-employed applicants should expect to show tax returns and business activity statements. Recent arrivals on temporary visas are accepted by some lenders but not others, since visa expiry affects affordability assessments. A family loan suits those who can sign a clear agreement without straining relationships.

Comparing the main channels

Steps to borrow privately in Australia

1. Get your free credit reports from Equifax, Experian and illion and correct any errors.
2. Work out a realistic monthly repayment using your actual bank statements.
3. Shortlist two or three licensed lenders and check each one on the ASIC professional register.
4. Compare the comparison rate, which bundles interest and standard fees, rather than the headline rate.
5. Read the key facts sheet, early repayment terms and hardship policy before accepting.
6. For a family loan, sign a written agreement and pay by traceable bank transfer.
7. If a dispute arises, complain to the lender first, then to AFCA free of charge.

Mistakes and red flags specific to Australia

• A lender that asks for an insurance bond, a security deposit or a release fee by gift card or crypto before paying out; licensed Australian lenders deduct fees from the loan, never in advance.
• An offer with no Australian Credit Licence number, or one that does not match the ASIC register.
• Signing several small amount contracts in a row, which multiplies establishment fees.
• Assuming a family deposit is protected without a written loan agreement.
• Using buy now pay later accounts to cover rent, which now counts as regulated credit.

Frequently asked questions on private loans in Australia

These answers summarise the national rules at the time of writing. Caps, Centrelink thresholds and licensing conditions are reviewed periodically, so confirm the current figures with ASIC Moneysmart, Services Australia or the ATO before relying on them for a decision.

Is peer-to-peer lending still available to Australian borrowers?

Pure retail peer-to-peer funding has largely disappeared, but the platforms that pioneered it still lend under credit licences. Borrowers apply online, receive a risk-based rate and deal with the platform directly, while funding now comes mainly from institutional investors and securitisation programs.

Can a private individual charge interest on a loan to a friend?

Yes. An occasional private loan outside any business activity is not regulated credit, so no licence is needed. The lender must declare the interest as income, and the agreement should be written down to remain enforceable if repayment problems arise later.

Do credit unions accept borrowers with a poor credit history?

Some do, particularly where the applicant is a long-standing member with a steady income. They must still apply responsible lending tests, so a recent default or unpaid tax debt can lead to refusal, a smaller amount or a request for security.

What happens if a lender breaches the cost caps?

Charges exceeding the statutory caps are generally not recoverable, and ASIC can seek penalties and refunds. Borrowers who suspect overcharging can lodge a free complaint with AFCA, which can order compensation and adjust the contract without court proceedings.

By Nabil Frik · Updated 13 October 2026