Risky borrowers or inspiring individuals?

Non-bank says self-employed borrowers have been left in the dark by traditional lenders

Risky borrowers or inspiring individuals?

Self-employed customers have often been seen by traditional lenders as being riskier borrowers, but Aaron Milburn of Pepper Money sees them differently. He believes self-employed customers are inspiring and shouldn’t have to forego their dreams of home ownership just because they don’t fit neatly into a policy box. MPA spoke with the general manager, mortgages and commercial lending about the biggest challenge facing self-employed borrowers at the moment and how Pepper has stepped in to help.

After the challenges faced by small businesses across the country due to COVID-19, the recent easing of restrictions has been like a light at the end of the tunnel. But for self-employed borrowers looking to buy a home or improve their financial situation, the challenge of getting a loan is far from over.

Read more: The changing face of non-conforming clients

While many banks have dropped their rates to record lows and introduced cashback offers for new customers, most of these products come with stringent criteria that favours PAYG employees, meaning self-employed borrowers have largely been left to fend for themselves.

“I think the biggest challenge for a self-employed borrower at the moment, after all of what they’ve gone through this year, is being challenged when they’re looking into home ownership or bettering their financial situation,” said Milburn. “They’re overlooked by the traditional lenders in the country simply because of the way someone has proved their income.

“And so I think the challenge for a self-employed person is they feel that in some cases they are looked upon as a lesser borrower or more risky borrower when in fact they’re quite simply not.”

Milburn said self-employed borrowers are actually inspiring, given the courage it takes to go out and start a business. And, this is something brokers can easily relate to, given that the majority are also self-employed, he said.

“It has never been more important for brokers to be there at the frontline of supporting self-employed borrowers,” he said. “It’s not more complicated, it’s no different to writing a standard loan - it’s just simply using different types of paperwork to verify income. The myth that it takes longer or is more complex is just unfounded.”

To fill the gap that other lenders have left in the self-employed borrower segment, Pepper recently launched a promotion across select prime, near prime and specialist home loan products, for their full doc and alt doc customers that go through a broker.

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“Because a large percentage of our customer base is self-employed, we have a huge amount of expertise in this area,” he said. “We’ve got loans that are specifically designed for self-employed and at a great rate.

“The overarching statement is that we deal in real life. We work with self-employed borrowers to understand what verification of income they have got and then we align that to the three cascading credit models that we have in place, whether that be prime, near prime or specialist.

“It’s rare we can’t find a home for a self-employed borrower just because of income type. We have three layers of solutioning for that so regardless of tenure of documentation we can normally help find a home for that customer.”