Near Prime Loans 101 with Pepper Money

by NZ Adviser06 Nov 2020

Why is Near Prime an important segment for advisers to tap into?

Near Prime solutions need to be an integral part of an adviser’s offering to address the gap created by the restricted lending criteria of traditional lenders. Not only will this expand an adviser’s business, but it will give them the satisfaction of helping more families through real life hurdles.

What makes a borrower Near Prime?    

Traditional lenders typically restrict the borrower types they accept to clean credit, standard income customers. Pepper Money knows that real life happens and that borrowers may fall outside of this profile for a number of reasons, such as:

  • Complex income

Contractors, overtime hours or borrowers who receive income from multiple sources like Work and Income New Zealand.

  • Self-employment

Self-employed borrowers with incomplete tax returns but who can provide alternative income documentation such as GST101 returns.

  • Past credit impairment

Borrowers with defaults greater than $1,000 once registered over 24 months, or have been discharged from bankruptcy by more than 1 day.

Common reasons why Near Prime borrowers come to Pepper Money   

The Pepper Money difference is our real-life approach to assessing applications. We assess every application on a case by case basis and make our decisions based on individual merits. In other words, if the customer can afford the loan, and it makes sense, we’ll seek to find a workable solution. Generally, we find that customers who fit a Near Prime profile are looking to:

  • Refinance or consolidate an unlimited number of debts including tax debt
  • Access cash out for business expansion
  • Increase their investment property portfolio

How should advisers go about educating their existing customers about Near Prime options?

The challenge for advisers is often positioning a Near-Prime product with the customer when they may have never needed to consider an alternative lender in the past. It is an emotional time for a customer so advisers need to ensure they create a positive environment and clearly communicate why their situation is suited to what the lender can offer. This however, should not deter an adviser from helping a borrower who requires an alternative solution. These borrowers are simply looking for someone to take the time to understand their personal circumstances and with the guidance and support from an empathetic adviser, these customers tend to remain loyal and readily refer potential customers in future.

How should advisers best position their near-prime loan applications so they get approved?

The application process for a Full Doc Near Prime loan is no different to a Full Doc Prime loan. 

In submitting a strong application, attention to detail is key. Taking the time to include as much information as possible upfront will save time in processing and a quicker path to approval for the customer.

If you have a customer you suspect may need a Near Prime solution, contact your Pepper Money BDM or our dedicated Scenarios Team today. Alternatively, run the scenario through the Pepper Product Selector Tool which could give you an Indicative Offer within minutes.

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