Alternative lending is set to play a bigger role as borrowers needs evolve in line with the patchwork nature of the modern economy and as traditional financing becomes more constrained
This article was produced in partnership with Pepper Money New Zealand.
Alternative lending plays an important role for many who have what used to be considered an unorthodox financial profile.
These days that definition captures quite a few Kiwis.
Whether it is a self-employed person, someone with a past bankruptcy, or a borrower working in the gig economy with an income that fluctuates from month to month, all are simply people dealing with real life who are capable of moving forward, said Michelle Sargeant, national sales manager at nonbank lender Pepper Money.
“Being a financial adviser means you are passionate about assisting as many customers as you can, and there is nothing more rewarding than helping a customer that is in a tough position – but to do that you need access to lenders that are willing to work with you to understand their situation,” she said.
This is where non-bank lenders like Pepper Money come in.
“We aim to provide borrowers with a broader range of loan options than traditional lenders and work closely with financial advisers to help them achieve their goals.”
Alternative lending differs to regular lending. All loans are subject to the same inquiry, verification and assessment as traditional loans - including credit checks and repayment histories.
“[But] we take the time to understand a customers’ personal circumstances,” said Sargeant. This means that an application that rejected by narrow main bank criteria is more easily approved at a lender like Pepper Money.
Take somebody with an atypical income that ebbs and flows depending on workflow or season for example.
“This could mean historical financial statements that don’t reliably demonstrate the customer’s trading position or profitability, and they might fall short of meeting traditional full-doc criteria,” said Sargeant.
“We [also] understand people can earn money outside of standard employment income, so we consider different kinds of financial sources when evaluating loan applications.”
Sargeant said these types of borrowers are only going to become more common as the New Zealand economy evolves out of the radical change bought about by events of the last 24 months.
While a regular bank might use algorithms to assess an application, Pepper Money has developed a more flexible approach that allows cases to be assessed individually against its range of home loans including Prime, Near Prime, and Specialist solutions.
“Thanks to our cascading underwriting assessment, financial advisers only need to submit one application to access our full range of home loan products – saving them time and effort.”
Pepper Money also has the Pepper Product Selector (PPS) online tool that lets financial advisers assess the customer’s borrowing capacity and see indicative home loan rates and fees quickly and easily.
With the customer’s consent, the adviser answers 12 to 14 quick questions about the borrower which allows PPS to determine the right Pepper product in less than five minutes. This process includes a comprehensive credit check that doesn’t impact the client’s credit score.
Of course, Brokers still need to submit a detailed application and doing so will save time in processing and could lead to a quicker approval. Brokers should also help the client understand why the product is right for them and put the information into context by showing how repayments fit with their pay cycle and how they can manage the loan.
It is a unique combination of technology with the human touch at the crucial points in the process that sets Pepper Money apart.
“The hallmark of our value proposition is our manual assessment of all applications,” said Sargeant.
“We carefully take the time to understand each customer’s personal circumstances to make sure they receive the most appropriate product and rate.”
The focus on technology to ease the heavy lifting at the right places, as well as effective BDM and credit support enables Pepper Money to equip advisers with the right tools and knowledge to help more customers succeed.
Having entered the New Zealand market in 2019, Pepper Money quickly established itself as a lender that truly embodies the spirit of the non-bank sector. It provides a variety of flexible home loan solutions designed to meet customer needs, including some the banks won’t. Pepper Money proudly offers hard-working Kiwis with a real-life and flexible approach to lending. They look at each Kiwi family or individual’s situation. Helping people succeed is at the heart of what they do, and that means whether someone is just getting started, recovering, or looking to improve their situation.
