Non bank lenders are growing in popularity as an alternative to Australia’s Big 4 banks. But what are they? And could they be an option for your next personal or home loan? If you’ve struggled with debt or bad credit in the past, they could offer you a solution.
Let’s take a closer look at non bank lenders and the 10 amazing benefits they could have for your next personal or home loan.
What are non-bank lenders?
A non-bank lender is a financial institution that lends money to individuals or businesses, but isn’t a bank, building society or credit union. A non-bank lender has their own source of funds, which they purchase at a wholesale rate. Then, they lend those funds out to consumers with an added margin for profit. Non-bank lenders are often mortgage lenders, or specialise in debt consolidation loans, such as home loan refinancing and personal loans.
Do non-bank lenders in Australia require a credit check?
In Australia, most non bank lenders still require a credit check to access a loan. But if you suffer from a poor credit rating, or have been rejected for a loan in the past because you’re considered a ‘high-risk borrower’—don’t despair. Because non-bank lenders aren’t regulated by the Australian Prudential Regulatory Agency (APRA), the way they assess loan applications is different to traditional banks. Non-bank lenders are more accommodating to people with a fluctuating credit history or those who are self employed. This means that if you have poor credit, you’re more likely to be approved by a non bank lender, than you would be by a traditional bank.
What are the benefits of a non bank lender?
Non-bank lenders are widely accepted as a legitimate alternative to traditional banks, and have even contributed to a more competitive marketplace, meaning consumers have more options when looking for a cheaper home loan or personal loan.
1. Non bank lenders can offer lower interest rates (because they borrow at a lower rate)
Non bank lenders borrow funds at wholesale rates, and this means they can pass those savings on to consumers through competitive, often cheaper, interest rates than traditional banks.
2. Your application is assessed by a person, not a computer
Life isn’t always black and white, especially when it comes to our financial history. Because non-bank lenders tend to be smaller institutions than banks, they’re likely to personally assess your application, and approve it based on its merit. With traditional banks, your application will first be assessed by a computer algorithm which can flag issues like a fluctuating credit history, or non-traditional employment, and reject your application based on these factors.
3. It’s easier for self-employed people to apply
Sometimes, people who are self-employed have problems being approved for home loans or personal loans by traditional lenders, because the banks are looking for the security of steady income that comes with having an employer. Non bank lenders tend to be a good option for self employed applicants because they take your individual circumstances into account, and will tailor a loan product to suit your employment status.
4. Non bank lending is a growing market
Non bank lending is a continuously growing market, which is great for consumers who benefit from the increase in competition. The more non bank lenders on the market, the more likely it is that they’ll continue to offer competitive rates and better customer service.
5. Smaller size often means better customer service
Due to non bank lenders being smaller in size than traditional banks, they tend to offer a more personalised level of customer service. To stand out from the competition (especially the Big 4 banks), industry awards recognising excellence in customer service are often hotly contested.
Even though most non bank lenders are based online, their employees are often located in Australia, and you can expect shorter call times and faster email responses.
6. Faster loan application turnaround times
Unlike traditional banks which often have large hierarchical structures that can lead to delays (especially if you’re a non-conventional customer whose application requires further documentation) the smaller size of non bank lenders means that your loan application may have a shorter turnaround time.
7. You can apply after being rejected by the bank
Non bank lenders are specialist lenders known for helping higher-risk borrowers who have been rejected by the major banks. If you’ve had trouble accessing a personal loan or home loan recently, they could be a good option for you. This is because every time you apply for a loan in Australia and it’s rejected, it can be a red flag on your credit report that traditional banks will look negatively on. Often you’ll be advised to wait six months before applying for a loan again. However, with a non-bank lender, they’re more likely to take this into account without judgement, meaning you don’t have to have to wait to submit a new application.
8. Non bank lenders are financially secure
While non-bank lenders are exempt from Australian Prudential Regulatory Agency (APRA) regulations (meaning that they can lend to higher-risk borrowers), they’re still subject to financial industry codes including ASIC, Australian Consumer Law and Privacy Laws. This means that if you can find a better deal for your personal loan, car loan or home loan with a non bank lender, there’s no need to worry that your reduced rates come with reduced financial security.
9. Non bank lenders often come with lower set-up fees than the Big 4
Because they’re not large institutions, and often only offer services online, non bank lenders tend to have lower overheads than the Big 4 banks. This means that they can pass some of those savings onto consumers through lower set up fees and other administrative costs.
10. Non bank lenders give you more choice and flexibility
Deciding on a financial product such as a personal loan or home loan is a big responsibility. It’s essential that you do your research and understand that non-bank lenders are just one out of many options that might be right for you. However, if you have problems with credit card debt, personal debt or require home loan refinancing, a non bank lender like Debt Negotiators might be a good solution for you.
At Debt Negotiators, we’ve helped thousands of Australians get back on their feet after financial hardship such as debt and bankruptcy. Speak to us today about how we can help you with a personal loan or home loan refinancing, without having to go to the traditional banks.