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Non-bank Lenders

Non-bank home loan lenders offer great deals for everyone, not just the credit-impaired. Compare your options with Savvy.

Non-bank lenders explained

If you’re shopping for a home loan, consider using a non-bank lender. They’re safe, easy to deal with, and offer some great mortgage deals. In this article, we discuss what non-bank lenders are and how they compare to the major banks. We look at the upsides and downsides to help you decide which lender is best for you.

What is a non-bank lender?

The simplest way to describe a non-bank lender is it’s an organisation that can loan money but can’t accept deposits. This means they don’t offer products like savings accounts or term deposits.

Examples of non-bank lenders include insurance companies that lend funds, intermediaries, fund managers, wholesale funders, and lenders that securitise funds.

Where do non-bank lenders get their money?

Traditional banks and credit unions use deposits and other income sources to fund the loans they issue. They are heavily regulated to ensure that their customers’ deposits stay safe and that the bank is not taking too many risks with people’s savings.

Non-bank lenders, on the other hand, don’t have access to deposits and are forced to get all their funding from the wholesale money market, private investors and large organisations. Because they are not regulated in the same way, they can offer loans to people who would otherwise be rejected by the more cautious banks.

Are non-bank lenders safe?

Yes, they are. Though non-bank lenders don’t hold banking licences, they are still subject to the National Consumer Credit Protection Act (NCCP). They must have a credit licence, disclose rates and fees accurately, and they are overseen by ASIC. The Australian Consumer Law, Privacy Law and the ePayments Code also apply.

Since non-bank lenders don’t take deposits, they are not covered by the $250K government guarantee. However, it’s important to remember that, as a borrower, you aren’t giving the lender any money, so if the lender goes bust, you won’t lose anything. Most of the time, your mortgage will simply be bought out by another lender, and your contract and repayments will remain unchanged.

What’s the difference between a bank and a non-bank lender?

Pros and cons of non-bank lenders

PROS

Good service

Many people who have had a bad experience with a major bank turn to non-bank lenders because they have excellent customer service.

Competitive rates  

Because non-bank lenders obtain funds at wholesale prices, they are able to offer their customers competitive interest rates.

Low fees

Since non-bank lenders mostly operate online, they have few brick-and-mortar overheads, which keeps their fees low.

 Efficient

Because non-bank lenders are usually smaller than the banks, they don’t have layers of bureaucracy. They can process applications quickly and efficiently.

Flexible

When it comes to approving your loan application, non-bank lenders are much more flexible than banks. If you have a low credit rating, or a non-regular income source, you may want to consider a non-bank lender.

CONS

Fewer rate reduction

Non-bank lenders use a mix of private and banking funds. For this reason, they can’t always pass on a decrease in interest rates to their customers. If you want a variable rate so you can take advantage of upcoming rate decreases, then you may want to consider borrowing from a bank.

Limited services

Banks can take care of all your deposit and borrowing needs and operate as a one-stop-shop. Non-bank lenders, on the other hand, don’t offer the same range of products.

No physical branches

Many Non-bank lenders don’t have shop fronts at all. They simply do all their business online or over the phone. Some have a limited number of physical offices where you can go in and speak to a lender face-to-face, but you may have to go out of your way. If you prefer to do your banking in person, you may want to stick with a major bank that has branches everywhere.

Frequently asked questions about non-bank lenders

Do non-bank lenders offer fixed interest rates?

Yes, most non-bank lenders offer fixed and variable interest rates as well as split mortgages.

Do non-bank lenders offer offset accounts?

Not all non-bank lenders offer offset accounts, but many do.

Can I make extra repayments and redraw funds from my non-bank mortgage?

Yes, these features are pretty common among non-bank lenders, though they may charge you a fee. You may also need approval from the lender, and there may be limits on how much and how often you can make extra repayments or redraw funds.

Do non-bank lenders offer investment loans?

Yes, they do, though they are usually a little more expensive than owner-occupier home loans.

Can I get a no-doc loan from a non-bank lender?

A handful of lenders will offer no-doc home loans if there is a large deposit going in. However, most non-bank lenders issue low-doc loans. You still need to provide financial paperwork, but they are flexible and can accept non-standard documents.

Where can I find non-bank lenders?

Savvy’s website lists the best mortgage deals available from reliable, licenced non-bank lenders. Our comparison tool can help you weigh up your options and find the home loan that best suits your needs.