There are a lot of myths about non-bank lenders, almost all of them are untrue. We expose some common myths about this important part of Australia's home loan and finance system.
We debunk some common myths about this segment of Australia’s home loan and finance system.
Myth #1: Non-bank lenders are not trust worthy
Busted: 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 bank, which gives people more choice and often a chance they might otherwise not have - of getting into their own home.
Non-banks make up a significant part of the home loan market, lending literally billions of dollars of all the home loan written in Australia1.
Myth #2: Non-bank lenders only give loans to people with a bad credit history
Busted: Non-conforming borrowers are from all walks of life, including self-employed people, first time buyers and property investors.
Just because an applicant been turned down for a loan by a bank doesn’t have to mean they’re a credit risk. Some borrowers get knocked back simply because they don’t fit the banks usual boxes, like having a credit history, or meeting Lenders Mortgage Insurance (LMI) providers’ criteria. One 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 bank lenders. There are all sorts of reasons a loan application can be rejected but at Pepper Money we take all aspects of your financial circumstances into consideration, rather than using blanket rules for all borrowers.
Myth #3: Non-bank loans are expensive
Busted: You can see loans offered by non-bank lenders are advertised at competitive interest rates; they wouldn't survive if they weren't competitive. Multiple factors can impact upon what creates the interest rate you get offered including market influences, the nature of the product and credit assessment requirements.
At Pepper Money, 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 with loans for people who have been discharged from bankruptcy or other non-conforming loans. This ensures we can provide the right loan options for the borrower’s circumstances at interest rates that are competitive to that situation.
Myth #4: Non-bank lenders are not financially secure
Busted: The non-bank 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 any banks. Loan applications will only be approved if the application satisfies Pepper Money’s loan suitability criteria and credit assessment requirements, including whether the borrower is able to pay the minimum repayments for the loan. Read more about Pepper’s responsible lending practices.
Plus, Pepper is actually funded by some of Australia’s leading financial institutions so you can rest easy knowing that we can support your loan with us.
Myth #5: Non-bank lenders have less product options than the banks
Busted: Non-banks like Pepper Money provide a wide range of finance options. They offer more flexible products than the banks and, because of their unique approach to lending, they tailor loans for borrower’s who do not fit the lending criteria of the banks.
At Pepper Money, our home loans are available for all sorts of borrowers, from those with full documentation to those working with alternative documentation. That's because our approach looks at all aspects of a person's financial circumstances and credit requirements and our Lending Specialists are happy to help someone find the right loan for their situation.
We believe that a healthy home loan market needs both the big banks and non-bank lenders like us: a wide range of lenders improves competitiveness, drives innovation and ultimately gives people more options.
This article provides you with factual information only, and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser. Neither Pepper nor its related bodies, nor their directors, employees or agents accept any responsibility for loss or liability which may arise from accessing or reliance on any of the information contained in this article. For information about whether a Pepper loan may be suitable for you, call Pepper on 13 73 77.