5 common non-bank lender myths
There are a lot of myths about non-bank lenders, almost all of them are untrue. This blog exposes some of the most common myths about this important part of Australia's home loan and finance system.
Myth 1: Non-bank lenders are not trustworthy
Non-bank lenders are perfectly trustworthy home loan providers who help drive competition in Australia’s mortgage market. They offer borrowers an alternative to getting a loan from a major bank, which gives people more choice, and often provides a chance for borrowers to secure a property that they might not of otherwise had. Non-bank lenders make up a significant part of the home loan market, lending billions of dollars each year.
Myth 2: Non-bank lenders only provide loans to people with bad credit
Non-conforming borrowers are from all walks of life, including self-employed people, first time buyers and property investors. Just because a borrower has been turned down for a loan by a major bank doesn’t have to mean they’re a credit risk. Some borrowers get knocked back simply because they don’t fit the major banks credit policy.
For example, if you’re self-employed you might not have evidence of cash flow or PAYG statements which can mean your loan application gets rejected by the major bank lenders.
There are all sorts of reasons a loan application can be rejected, non-bank lenders will take all aspects of your financial circumstances into consideration, rather than using blanket rules for all borrowers.
Myth 3: Non-bank loans are more expensive
Multiple factors will impact what creates the interest rate you get offered, including market influences, the nature of the product and credit assessment requirements.
With non-bank lenders every home loan application is individually assessed based on its own merits, with the assessment carried out by a real person, not a computer – even loans for people who have been discharged from bankruptcy. This ensures that non-bank lenders can provide loan options and interest rates suited to the borrower’s individual circumstances.
Myth 4: Non-bank lenders are not financially secure
The non-bank lending sector has undergone significant changes in the years following the global financial crisis. Non-bank lenders must comply with the same consumer credit rules and regulations as the major banks. Loan applications will only be approved if the application satisfies the lenders loan suitability criteria and credit assessment requirements, including whether the borrower is able to pay the minimum repayments for the loan. The majority of non-bank lenders are actually funded by some of Australia’s leading financial institutions, so you can rest easy knowing that they can support your loan.
Myth 5: Non-bank lenders have less product options
Non-banks provide a wide range of home financing options. They offer more flexible products than the major banks, because of their unique approach to lending they can tailor loans for borrower’s who do not fit the standard lending criteria of the major banks.
Non-bank home loan providers have a variety of products available for all sorts of borrowers, from those with full documentation to those working with alternative documentation. That's because the lenders approach looks at all aspects of a person's financial circumstances and credit requirements.
Ultimately, a healthy home loan market needs both the big major banks and non-bank lenders. A wide range of lenders improves competitiveness, drives innovation and ultimately gives borrowers more options. Talk to your trusted Mortgage Broker today to explore your home loan options.
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