Strategy · October 2026 · 7 min read
A short term private lending quote came across our desk this week. The facility was $325,000 and about $300,000 was going to hit the account. Here is where the rest goes, and the lines in a quote like that worth reading twice.
Photo: Alex Proimos from Sydney, Australia, CC BY 2.0 via Wikimedia Commons
A quote came across our desk this week. Borrow $325,000. About $300,000 actually lands in the account.
Nothing dodgy about it. Every number was written down, in the quote, where anyone could read it. The number at the top of the page and the number that turns up in your bank account are simply two different numbers, and only one of them gets said out loud.
This was a private lender. Six month term. The kind of loan that exists for a deal a bank will not move fast enough on, or will not touch at all.
The quote at a glance
The reason the two numbers differ has a name. Capitalised interest.
On a normal home loan you make a repayment every month and part of it is interest. On a lot of short term private loans you make no repayments at all.
Instead, the interest for the whole term is worked out up front. It is either taken off the loan at the start or added to what you owe at the end, depending on how the lender writes it.
On this quote it came off the top. More than $14,000 of interest for six months, gone before the borrower had seen a dollar of the money.
That is not a trick. It is the product. A borrower on a loan like this usually lacks the cashflow for monthly repayments, because the whole point of the loan is to bridge a gap before the money arrives. So the loan funds its own interest.
It is a legitimate structure that solves a real problem. It just changes what you are agreeing to. You are not borrowing $325,000. You are being handed about $300,000, and you owe $325,000 back.
Here is the part that sent us back through the quote line by line.
Fourteen thousand dollars of interest against a gap closer to twenty five. So another ten thousand or so was sitting elsewhere in the document, in lines that are not interest and do not get mentioned when somebody describes the loan as a $325,000 facility.
If the amount borrowed and the amount received are different, do not assume the gap is interest. Add up every line yourself.
That lesson is not about private lenders specifically. If the total does not reconcile, ask.
So what sits in those other lines? On short term lending generally, this is the usual cast.
None of those are unusual and none of them are hidden. They are just spread across several pages while the headline number sits on page one.
Read the quote twice
The early repayment question matters more than people expect. On some short term loans the interest for the full term is charged whether you use it or not, so repaying in month three costs the same as month six. On others it is rebated.
That single difference can be worth thousands, and it is a question, not a negotiation. Get the answer in writing.
On the late exit, ask what happens, not if. A fortnight's delay on a settlement is normal, so find out what a fortnight costs before you need to know.
A six month loan is not a mortgage. It is a bridge, and a bridge has to land somewhere.
Sale of a property. A refinance to a mainstream lender. Construction finishing and a bank taking it out. Money arriving from somewhere with a date attached to it.
If the plan is to refinance to a bank in six months, the question is whether a bank will take it in six months. Not whether one would take it today. The debt will have grown, the valuation may have moved, and you will have a short term loan on your credit file.
Before signing, we would want to know roughly what the takeout looks like and which lenders would consider it. If refinancing is the exit, our refinancing page explains how that assessment works.
Where this goes wrong is almost never the day it funds. It goes wrong at the end. The exit slips, the term is extended, interest capitalises again on a bigger balance, and the debt against the property climbs while the property has not moved.
Do that twice and a deal that was tight becomes a problem.
To be clear about where we land: we are not saying do not do it.
Private and non bank lenders exist because the mainstream market is slow and narrow in ways that cost people real money. A settlement about to fall over, a deposit at risk, a build with a shortfall, a business that needs to move this week.
Six months of breathing room can be worth paying properly for. Twenty five thousand dollars against losing a deposit or a deal is arithmetic some people would do in a heartbeat.
The cost is only a bad cost if nobody told you what it was.
What we would push back on is treating a quote like this as a rate comparison. On a short term facility the interest rate is close to meaningless on its own, because the fees do so much of the work and the term is so short.
Two quotes with the same rate can be thousands apart on what lands in your account. The number to compare is the total cost of having the money for the time you need it.
A short term facility is a specific tool for a specific problem, not something most people should ever need.
Have you been quoted a loan and only found out later what actually landed in the account? If you are weighing up a short term quote now, book a call and we can read it through with you.
The information in this article is general in nature and does not take into account your personal circumstances. Speak with a qualified mortgage broker before making lending decisions.
