Guide to Non-Bank Lenders in Australia
As the financial landscape in Australia evolves, more borrowers are turning to non-bank lenders for their financial needs. Non-bank lenders offer a range of services and benefits that differ from traditional banks, making them an attractive option for many Australians. However, with this growing interest comes a host of questions. Here, we address some of the most common questions asked about non-bank lending solutions in Australia.
What is a Non-Bank Lender?
A non-bank lender in Australia is a financial institution that provides loans and credit products but does not hold a banking license. Unlike traditional banks, non-bank lenders do not take deposits from customers. Instead, they fund their lending activities through alternative sources such as wholesale funding, securitisation, and other financial instruments. These lenders, sometimes also referred to as “specialist lenders,” may specialise in niche markets or cater to borrowers who might not meet the stringent criteria of traditional banks, making them an attractive option for borrowers with unique financial situations. At Brighten, we have established multiple warehouse funding facilities with domestic and offshore funding partners. Brighten’s warehouse and RMBS funding strategy is uniquely supported by the Real Asset Management Group credit funds. We offer a range of competitive Full Doc, Alt Doc and Construction loan products available to Prime and Near Prime, Resident and Non-Resident borrowers.
How Do Non-Bank Lenders Differ from Traditional Banks?
The table below summarises the primary differences between non-bank lenders and traditional banks in Australia:
Aspect |
Australian Banks |
Australian Non-Bank Lenders |
|---|---|---|
Deposit Services | Offer savings and checking accounts | Do not offer savings or checking accounts |
License Type | Hold banking licenses | Typically hold an Australian Credit Licence (ACL) issued by the Australian Securities and Investments Commission (ASIC). |
Source of Funds | The primary source of funds for banks is customer deposits, including savings accounts, checking accounts, and fixed deposits. | Wholesale funding, securitisation, institutional investors, private equity, and other debt instruments. |
Regulatory Oversight | Regulated by the Australian Prudential Regulation Authority (APRA) | Regulated by ASIC and the National Consumer Credit Protection Act (NCCP) |
Process and Product | Generally have stricter lending criteria and comprehensive assessment processes, more standardized products with limited customization, and slower approval processes. | Generally have more flexible lending criteria and tailored loan products, catering to borrowers with non-standard financial situations. Approval processes are typically faster due to streamlined operations and procedures. |
Typical Borrowers | Borrowers with stable financial situations and strong credit histories, often seeking traditional loan products and don’t mind comprehensive paperwork requirements. | A diverse range of borrowers, including those with non-standard financial situations, self-employed business owners, freelancers, borrowers with multiple or foreign income, and those seeking more customized loan products with potentially less paperwork. |
Borrowing Capacity | Borrowing limits can be more restrictive due to regulatory constraints such as DTI requirements, often resulting in lower borrowing capacity for some borrowers. | Generally offer more flexible borrowing limits, i.e., higher borrowing capacity, particularly for those with unique income structures or assets. |
What Are the Advantages of Choosing a Non-Bank Lender?
- Flexible Lending and Diverse Borrower Types: Non-bank lenders often cater to borrowers with non-standard financial situations, including self-employed individuals, freelancers, and those with multiple income sources.
- Higher Borrowing Capacity: Non-bank lenders generally offer more flexible borrowing limits, particularly for borrowers with unique income structures or assets, as they are less constrained by traditional regulatory requirements.
- Innovative Solutions: Non-bank lenders offer tailored rather than standardised loan products, such as Alt Doc loans designed to consider alternative income verification methods, accommodating fluctuating income and unique financial documentation requirements.
- Customer Service: Some non-bank lenders leverage technology to offer streamlined and efficient loan application processes, often resulting in faster approvals and more convenient borrowing experiences.
Tailored Loan Options for Diverse Borrowers
Non-bank lenders offer a variety of customised loan solutions to meet the unique financial needs of diverse borrowers, providing a flexible and accessible alternative to traditional bank loans. Here’s how they cater to different profiles:
- Self-Employed Individuals: Flexible loan solutions that consider alternative income verification methods, accommodating fluctuating income and irregular cash flows, making it easier for business owners and freelancers to secure finance.
- PAYG Employees: Loan products with higher borrowing capacity and faster approval times, leveraging stable income earners and straightforward documentation to streamline the lending process.
- Investors: Comprehensive loan products designed to support both residential and commercial property investors, with features like competitive interest-only loans, flexible repayment options, and tailored financing solutions to maximise investment returns.
- Expats, Temporary Residents, and Non-Residents: Specialised lending options that address the complexities of various residency statuses and foreign income, ensuring accessible financing for personal and investment needs.
How Do I Apply for a Loan with Non-Bank Lenders?
Applying for a loan with a non-bank lender is typically straightforward and can often be done online. With Brighten, our process is simple:
1. Submit your Application
We process your application and supporting documents, and issue you with a complimentary Pre-approval within 48 hours.
2. Valuation & Income Verification
We will begin our valuation and income verification process.
3. Documents Signing
We will issue formal loan approval and forward the necessary documents for signing. Australian borrowers can E-Sign via DocuSign.
4. Settlement
We finalise your settlement, and your loan is released to you. Congratulations!
Conclusion
Non-bank lenders in Australia play a key role in ensuring financial accessibility alongside traditional banks. They provide competitive products and flexible lending solutions, catering to a diverse group of borrowers. Whilst non-bank lenders come with their own set of advantages, understanding the landscape and conducting thorough research can help you make an informed decision that best suits your financial needs. As with any financial decision, it’s crucial to consider your individual circumstances and consult with a financial advisor if necessary.
Brighten is Reshaping
Non-Bank Lending
Our mission is to reshape non-bank lending in Australia.
At Brighten we believe in creating effective and innovative lending solutions – helping more home-buyers achieve their goal of home ownership within Australia.
We are leading the way in challenging the status quo to establish a real alternative to the major banks by focusing on new ideas and technologies to provide our customers and partners with intuitive, tailored and easy to use lending solutions.
FAQs
Are non-bank lenders regulated?
Yes, non-bank lenders in Australia are regulated by the Australian Securities and Investments Commission (ASIC). They typically hold an Australian Credit Licence (ACL), such as Brighten Financial (ACL 512 386), which means they and must adhere to strict lending standards and consumer protection laws. Many non-bank lenders have built strong reputations for reliability and customer service. However, it’s essential to conduct thorough research and choose a reputable lender with positive customer reviews and a solid track record.
Can I borrower more from non-bank lenders?
Potentially. Non-bank lenders generally offer more flexible borrowing limits, which can translate to higher borrowing capacity, particularly for those with unique income structures or assets. For example, at Brighten, existing debts are assessed at 125% of actual repayments. This policy niche can result in higher borrowing capacity for investors with multiple mortgages. Therefore, it’s essential to compare different lenders and loan offers to ensure you choose the best option for your financial needs.
Do non-bank lenders require a Credit Check?
Yes, most non-bank lenders will still require a credit check before approving a home loan. However, some non-bank lenders, such as Brighten, don’t apply a one-size-fits-all “tick box” approach. Instead, they assess each application on its merits, considering factors beyond just the credit score.
Do non-bank lender offer offset accounts
Yes, many non-bank lenders in Australia offer offset accounts as part of their loan products. An offset account is a transaction account linked to your home loan, where the balance in the account offsets the amount owed on the loan, reducing the interest charged. However, the availability of offset accounts can vary between lenders, so it’s essential to check with the specific non-bank lender to see if this feature is offered as part of their loan products.
Can I check my loan with a non-bank lender online?
Yes, many non-bank lenders provide online platforms where you can manage and check your loans. These online services typically allow you to view loan balances, make payments, and access statements. The specific features and functionalities can vary between lenders, so it’s best to check with your non-bank lender to understand the online services they offer.
What happens if my non-bank lender goes under?
If your non-bank lender goes under, your loan will likely be transferred to another financial institution, and you’ll continue making payments as usual. The terms of your loan agreement will typically remain unchanged. Regulatory oversight by ASIC ensures consumer protection, and you’ll be informed about any changes by the new lender or relevant authorities.