Bank vs Non-Bank Lenders
For those who are looking for financing, whether it be for a second mortgage or for a business loan, it’s important to know that the banks are not the only option. Non-bank lenders are a great alternative to traditional financial institutions, and are governed by the same strict regulations that banks are legally bound to follow.
The definition of a non-bank lender is a financial institution that is privately owned and does not hold an Australian banking licence. Some of the advantages of choosing a non-bank lender over a traditional bank include:
- Personal service – As private lenders have a smaller pool of borrowers than banks, it has long been recognised that they are able to provide more personal service to their clients. This is particularly true in terms of processing loan applications and taking individual circumstances into consideration.
- Flexibility – Non-bank lenders tend to be much more flexible than banks in terms of the loans that they offer and who they offer loans to. For example, a person with poor credit history or who is self-employed may not be given a loan by a traditional bank, but could apply to a private lender and have more of a chance for their application to be approved. These borrowers are commonly known as ‘high-risk’, but private lenders are more open to evaluating an applicant on their current circumstances as opposed to their past.
- Promoting competition – The presence of non-bank lenders in the financial market has been beneficial for borrowers, as not only do they increase the need for banks to keep their rates at reasonable levels but they also promote the creation of niche products that suit a specific target market.
No matter whether you decide to choose a bank or a non-bank lender, it’s important that you do your research and explore all of your options before deciding on a loan provider. Otherwise, you may find yourself locked into a loan that is no longer working for you.