Why use Non-Bank Lenders in Australia?

non-bank lender

The demand for non-bank mortgage lenders is continuously increasing because of the flexible and modern home loan products they offer. Some non-bank lenders are local to your region, while some are nationwide that operate online.

With less or no branches to maintain, non-bank lenders have lower overhead costs. Therefore, they’re able to offer the lowest home loan rates in Australia. Read on to know if this is the right type of financing for your home.

Non-bank lender: an overview

A non-bank lender is a company besides a bank that provides loan products to consumers. They don’t have a banking license, but they still follow strict regulations set by the Consumer Credit Code. This supervises all credit transactions in the country, together with the Australian Securities and Investments Commission (ASIC).

Non-bank lenders are not mutual. They’re also privately owned. They usually depend on wholesale sources for their funding. They have a wide range of products even for those who may not be able to match all financial products that banks offer.

They have different forms such as:

  • Neobanks or digital banks
  • Online lenders
  • Credit unions (they’re still covered by similar regulations to banks even if they’re not considered as such)

Some digital lenders may appear like small non-banks, but one of the Big Four banks actually own them. On the other hand, some newer neobanks in the country are independently owned companies. They’re in the process of getting full banking licenses.

Does a smaller lender offer lower home loan rates?

Most of the time, yes. A non-bank lender is more flexible in terms of fees and rates in home loan products. They get a competitive edge against banks by cutting the price of their products. As a result, banks need to step up to the competition by reducing their rates as well.

Here’s a list of some of the leading small and non-bank lenders in the country:

  • Newcastle Permanent
  • Kogan Money
  • Freedom Lend
  • Athena Home Loans
  • Tic:Toc
  • Reduce Home Loans
  • La Trobe
  • Yellowbrick Road

What if a non-bank lender becomes bankrupt?

You don’t really need to stress yourself on this. Non-bank lenders are covered by the majority of the regulations that govern banks. As such, although they are subjected to higher risks during a financial crisis, you’re still protected.

Non-bank lenders can’t force their borrowers to pay their loan balances when they’re facing a crisis. However, you can’t instantly escape your debt when they become bankrupt. You still need to continue paying your loan.

If a previous lender is acquired by a new lender, they’ll take over your mortgage. Hence, your current loan contract will remain in effect.

Are there any downfalls in transacting with a non-bank lender?

There are some disadvantages to getting a non-bank lender, but they’re relatively minor. This may also not be applicable to all lenders.

  • Fewer services

Several non-bank lenders give only a handful of loan products. This makes it more difficult in accomplishing all banking needs in one place.

  • No physical branches

If you want to do banking face-to-face, then a traditional bank is more suitable for you.

  • Fewer choices

Bigger banks have a wide range of mortgages that cater to several types of borrowers. Non-bank lenders offer fewer options. Applicants who have a bad credit history or are self-employed may have a difficult time getting approval.

Search for Non-Bank Home Loan Products with Help from Makes Cents.

When looking for home loan products from non-bank lenders, always review home loan products from non-bank lenders just like you would with banks. Check the interest rates, fees, and features that match your needs and goals.

Make use of home loan calculators to help you decide which product gives the best value for money. Comparison websites like Makes Cents also help you review features side by side, in just one click. Try it today!



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