As an alternative to Australia’s Big Four banks, non-bank lenders are gaining popularity. But what exactly are they, and could they be a suitable option for your next personal or home loan? If you’ve faced debt or insufficient credit, non-bank lenders could be a solution to explore.
According to the latest Reserve Bank of Australia data, non-bank lenders rapidly increase their market share. As of April 2022, their lending market share reached a ten-year high of approximately 20% annually over the past six months.
What are Non-Bank Lenders?
Non-bank lenders are financial institutions that lend money to individuals or businesses but are not classified as banks, building societies, or credit unions. Non-bank lenders acquire their source of funds wholesale and then lend them to consumers, adding an extra margin for profit. Mortgage lenders and debt consolidation loan providers like home loan refinancing and personal loans typically specialize in non-bank lenders.
Do Non-Bank Lenders in Australia Require Credit Checks?
Most non-bank lenders in Australia still require a credit check to access a loan. However, if you have a poor credit rating or have been declined for a loan due to being considered a “high-risk borrower,” do not be disheartened. The Australian Prudential Regulatory Agency does not regulate non-bank lenders, so they evaluate loan applications differently from traditional banks.
Non-bank lenders are more accommodating to individuals with an irregular credit history or self-employed individuals. This implies that if you have poor credit, you are more likely to be approved by a non-bank lender than a traditional bank.
What Are The Advantages of Using a Non-Bank Lender?
Non-bank lenders have emerged as a viable alternative to traditional banks and have contributed to a more competitive market, providing consumers with more options when looking for an affordable home or personal loan. Here are ten benefits of using a non-bank lender:
Lower Interest Rates
Non-bank lenders usually borrow funds at wholesale rates, which allows them to offer competitive, often lower interest rates than traditional banks.
Personalized Application Assessment
Unlike banks that use computer algorithms to assess loan applications, non-bank lenders typically consider applications personally based on their merit. This means that applications that banks might have rejected due to non-traditional employment or fluctuating credit history may be approved by non-bank lenders.
Better Options for Self-Employed Borrowers
Non-bank lenders are more likely to offer tailored loan products for self-employed individuals, who may have difficulty securing loans from traditional lenders due to their employment status.
Growing Market
The non-bank lending market continually expands, which means more competition, leading to competitive rates and improved customer service.
Faster Loan Application Turnaround
Due to their smaller size, non-bank lenders generally have a quicker turnaround time for loan applications than traditional banks.
A Second Chance After Rejection
Non-bank lenders are known for assisting higher-risk borrowers rejected by traditional banks. Applying with a non-bank lender won’t raise red flags on your credit report like repeated bank rejections can.
Financial Security
Non-bank lenders are still subject to financial industry codes, including ASIC, Australian Consumer Law, and Privacy Laws, ensuring they are financially secure.
Lower Set-up Fees
Non-bank lenders tend to have lower overheads than traditional banks, leading to lower set-up fees and administrative costs.
Greater Flexibility and Choice
Non-bank lenders provide more options for individuals with credit card debt, personal debt, or home loan refinancing requirements, adding to the range of financial solutions available to consumers.
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