Australia has always been (and remains today) highly committed to the Big 4 Banks. But when it comes to home loans, we’re also more than happy to consider the smaller, regional banks. These include banks like Suncorp, ING, Bendigo & Adelaide Bank, The Bank of Queensland and many more.

But many borrowers unconsciously (or consciously!) draw the line under non-bank lenders. This may be because they stay too loyal to their current bank lender, or because they simply don’t understand the way that non-bank lenders work.

We want to help you understand your options better by answering the most common questions about non-bank lenders.

Common questions about non-bank lenders

What is a non-bank lender?

Non-bank lenders, sometimes referred to as ‘specialist lenders’, are financial organisations that are permitted to loan money but can’t accept deposits. So, unlike a bank they don’t offer savings accounts or checking accounts. In many cases these lenders are organisations like insurance companies, fund managers and wholesale funders.

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

This is likely the most common question about non-bank lenders that we are asked. At its most basic the answer is simply that non-bank lenders can loan money but not accept deposits. But of course, there are many other differences. Some of these include:

	Bank Lenders	Non-Bank Lenders
Loan money	Yes	Yes
Take deposits	Yes	No
Hold banking licences	Yes	No
Subject to NCCP	Yes	Yes
Publicly listed	Yes	Sometimes
Government guarantee eligible	Yes	No
Regulated by APRA	Yes	No
Regulated by ASIC	No	Yes
Restrictions on investor loan portfolio	Yes	No

One major difference between banks and non-bank lenders is that while banks avoid lending to ‘risky’ borrowers, non-bank lenders often welcome them. These loans may be more expensive than other mortgages, but they give credit-impaired borrowers a pathway for achieving home ownership that they might not otherwise have.

Are non-bank lenders safe?

This is the second most common question about non-bank lenders that our experts receive. And the short answer is that yes, they are. Non-bank lenders don’t hold banking licences, but they are still subject to oversight by the National Consumer Credit Protection Act (NCCP) and the Australian Securities and Investment Commission (ASIC).

They are also required to have a credit licence, meet the requirements of Australian Consumer Law and Privacy Law, accurately disclose their rates and fees and meet the ePayments Code, which covers all consumer electronic payment transactions, including ATM, EFTPOS and credit card transactions, online payments, internet and mobile banking and BPAY.

These requirements and oversight mean that non-bank lenders are a very safe option here in Australia.

What happens if my non-bank lender goes under?

If your bank were to go bust your deposits with that bank would be protected by the Financial Claims Scheme government guarantee. But because your non-bank lender doesn’t take deposits it can’t offer the government guarantee.

However, this is a non-issue as a home loan borrower. That’s because if your non-bank lender were to go under, you wouldn’t be in a position to lose anything. Instead, your mortgage would likely be bought out by another lender who would take it over from the original. You would then continue to make repayments to the new lender.

Do non-bank lenders require a credit check?

Yes, in Australia most non-bank lenders will still require a credit check before signing off on a home loan. However, because non-bank lenders are regulated differently from banks, they have more flexibility to accommodate people who may be considered ‘higher risk’. This might include people who are self-employed, who have a fluctuating credit history or who have alternative financial documents.

So, while non-bank lenders will still require a credit check, if you have poor credit they are a better option than your traditional bank lenders.

Can I apply for a home loan with a non-bank lender after being rejected by a bank?

Yes! As specialist lenders they are in a better position to help higher-risk borrowers, even those that have already been rejected by a traditional bank. So, if you’ve had trouble accessing a home loan before, non-bank lenders could be the solution for you.

Do non-bank lenders offer the same variety of loan products?

Non-bank lenders offer almost everything that bank lenders can. This includes fixed and variable rate loans, as well as split mortgages. They also allow for extra repayments and will allow you to redraw funds, just as bank lenders do. Most non-bank lenders even offer no-doc home loans.

As with all loan products, the terms of each will depend on the lender. But they are certainly available just as they are with bank lenders.

Try a non-bank lender today

We hope we’ve answered your common questions about non-bank loans. However, the takeaway is pretty simple. When you’re seeking a home loan, don’t limit yourself to just banks. If you do, you could also be limiting the many options that could be even better for you. This is particularly true if you are a higher-risk borrower.

At Lending Loop we’ve helped thousands of Australians access home loans from both banks and non-bank lenders. And we’re more than happy to share our experiences and knowledge to advise you on the best choice for you. If you’re ready to get started, or just want to chat about your options, get in touch with our expert team. We’re here to help!