13 Oct Non-bank lenders a rock in a crisis
With a new baby and a mountain of debt, self-employed electrician Brad Teasdale was struggling to find a lender, despite having a successful electrical-solar contracting business.
The owner of Teaslec Electrical & Solar in Doncaster, in Melbourne’s eastern suburbs, had initially tried to consolidate the debts into his home loan through traditional banking but was having difficulty getting approval.
“The big banks didn’t want to help us,” Teasdale says today. “They were really conservative. They didn’t get the bigger picture that we’re running a business where we can’t be paying all these high interest debts, all compounding together.
His mortgage broker, Martin Bennett, owner and director of The Loan Room, agrees it was “the ultimate ‘computer says no’ loan” that needed a non-traditional banking solution.
Bennett says the fact his client is self-employed with a level of complexity to his financials was a challenge.
He says the secret to the success in getting the loan over the line was taking into account the savings that Teasdale would be making after refinancing with non-bank lender Bluestone.
Teasdale went from having to come up with over $13,000 a month to a little over just $4000 – boosting cash flow by more than $8000 – thanks to Bluestone, which wrote the loan through Bennett’s firm.
For Teasdale and his young family, this was life-changing.
“It definitely changed our lives,” says the 30-year-old, who recently celebrated his daughter Florence’s first birthday with wife Jessica. “It freed us up, amazingly.”
Bluestone’s chief customer officer James Angus says Teasdale’s is a perfect example of how rigid “one size fits all” policies let down customers, and how Bluestone is helping lots of everyday Australians.
“Refinancing, especially during the uncertainty surrounding COVID-19, can be an incredibly smart thing to do,” Angus says.
“Right now, 45 per cent of our applications are refinances and the majority of these are a refinance of the primary home and some debt consolidation – credit cards, business loans, ATO debt and so forth.
“Customers are consolidating debt and freeing up cash flow. But not all lenders like debt consolidation and limit that portion of the loan to a small number of unsecured debts. We allow unlimited debt consolidation on several of our products.”
Angus acknowledges there is a downside, which is paying more interest over the long run because, although the repayments are at a lower rate, they are now stretched over another 30-year term.
The lender’s strong financial performance backs up his confidence that Bluestone is a great choice for Australians like Teasdale.
In spite of the upheaval of COVID-19 across the industry, Bluestone had a strong year in FY20, with its loan book up 23 per cent following the launch of its highly successful “Prime” product suite in November last year.
Profitability also increased by 57 per cent from FY19, and with improved funding costs this increase looks set to continue into the next financial year.
Angus says that during the past year the company has “had to be cruel to be kind” in some cases.
“A lot of our customers are self-employed. So if your business can’t trade because of COVID the last thing they want is the additional burden of a new loan,” he says.
“We spoke to our brokers and we gave them plenty of time. We reviewed their pipeline, we identified loans scheduled for settlement, and determined if there had been an impact.
“From a hardship perspective, we almost went from zero to 100 within the first two weeks of April. By the time the second week of April came around, several customers who only settled with us in March were in hardship. And so we really had to pause at that point.”
Angus says about 25 per cent of Bluestone’s existing borrowers took advantage of the lender’s hardship options during the crisis.
“Around half of those – 47 per cent – have now come out of hardship and are making their repayments again. And that’s partly because we gave them the right hardship option up front, but also because we’ve remained in close contact with them to understand their evolving circumstances.
“Some have decided they want to clear the [missed] repayments, some are happy for us to capitalise those repayments, which is fairly standard with a longer-term payment deferral.”
As the end of the COVID-19 crisis hoves into view, Angus says Bluestone is hungry for new business from customers the big banks are eschewing.
“The savings are considerable – up to 2 percentage points under what the big banks are charging their legacy customers – which is a ten thousand dollar interest saving a year on our average $500,000 loan.”
Interested in what we can do for you? Give us a call today.
Source: Financial Review