5 reasons to choose a non-bank lender

by Greg on February 17, 2015

Non-bank lender

If you are thinking about buying your first property or upsizing and you need to borrow money your first thought might be to go to your bank and ask them. However there are so many lenders out there, including non-bank lenders that it is important to consider them all. Both banks and non-bank lenders have pros and cons but how do you know which is the right one for you?

Sometimes choosing the right mortgage can be an overwhelming experience. There are so many lenders out there competing against each other and offering different product features, so finding the right one can be a challenging take. The important aspect when looking for the right loan is to look at all the different features on offer. Once you have made a list of these you need to stop and think about their relative importance to you and your financial position. You then need to rank the features in order of importance and once you have completed this you will have a great checklist against which you can measure all the different mortgages.

Who are non-bank lenders and what can they offer me?

Non-bank lenders are basically what they say they are. They are not a bank, a building society or a credit union as they do not hold a banking licence.

Are non-bank lenders trustworthy?

Some people may err on the side of caution with non-bank lenders; however both banks and non-bank lenders have to abide by the same laws, rules and regulations, such as the Consumer Credit Code which governs all credit transactions in Australia. And the Australian Securities and Investment Commission which requires lenders to be transparent with fees, rates and that the required information is made available to you.

What benefits will I get by opting for a non-bank lender?

  • They offer very competitive rates and can often be a cheaper option.
  • They often have a less stringent lending criteria so it’s a good option if your credit rating is on the low side or you have be declined a loan by a bank in the past.
  • They tend to have low set up and ongoing costs.
  • They are often more flexible in meeting your specific needs and requirements.
  • They offer a more personalised customer service and a greater range of niche loan products to suit your individual circumstances.

However with pros there are always disadvantages. Non-bank lenders can be more vulnerable to economic conditions. When the Global Finical Crisis hit a number of lenders withdrew from the market. In addition, they tend to have a limited product / service offer that may not suit you and your needs.

What benefits will I get by opting for a bank lender? 

  • Banks are generally more established institutions and hold the majority of the market when it comes to mortgages.
  • Ease of access. For some of you, you may find it easier to stick with the same bank that you manage all your finances through. However, you should research the market as you may find a much better deal elsewhere which could save you thousands in the long run.
  • Banks have an extra level of regulation under the Australian Prudential Regulatory Authority (APRA) who ensure that, under all reasonable circumstances, financial promises are made by institutions.

There are of course disadvantages with bank lenders too. They are such big institutions where the service can be a lot slower and less personable. They also can’t offer some of the more tailored loan options that non-bank lenders can offer. And overheads can often be more expensive too; these costs are often reflected in their fees.

So now you’re armed with all the facts you should be well on your way to finding the very best deal out there! Remember with any big decision in life, it’s important to do your homework and speak to the right people who can help you and offer you valued advice. At State Custodians we are one of Australia’s leading providers of home assistance and advisory products and loans to home owners, landlords and property investors. We make managing your home and investment property easy by providing advice, assistance, unique insurance products and other innovative solutions.

 

by Justin Grossbard

Justin Grossbard is State Custodians’ Digital Marketing Manager. He has worked with some of Australia’s leading online businesses.

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