There are a lot of myths about non-bank lenders, almost all of them are untrue. We'll explore some facts and expose some common misconceptions about this important part of Australia's home loan and finance system.
What is a non-bank lender?
A non-bank lender is simply a finance provider that isn't a bank. This means that since they aren't a deposit-taking institution, their loans aren't funded by customer deposits. Instead, their loans are funded through securitisation and capital raising.
Are non-bank lenders as 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 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 loans written in Australia1.
Do non-bank lenders only give loans to people with a bad credit history
Nope! While non-bank lenders are still a viable option for prime borrowers (those who could go to a traditional lender, tick all the boxes and have a squeaky-clean credit score), non-bank lenders often specialise in providing loans for non-conforming borrowers.
Non-conforming borrowers are from all walks of life, including self-employed people, first time buyers and property investors.
Just because an applicant has 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.
Are non-bank loans more expensive?
Multiple factors can impact what 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 loan options and interest rates suited to the borrower’s circumstances.
Are non-bank lenders financially secure?
Absolutely. 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.
Do non-bank lenders have fewer product options than the banks?
Not at all. If anything, they offer a wider range of products that are suited to different market niches. 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 borrowers 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 or speak to an accredited Pepper Money broker.
All applications are subject to the credit provider’s credit assessment and loan eligibility criteria. Terms, conditions, fees and charges apply. Information provided is 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.
©Pepper Money Limited ABN 55 094 317 665; AFSL 286655; Australian Credit Licence 286655 (“Pepper”). All rights reserved. Pepper is the servicer of home loans provided by Pepper Finance Corporation Limited ABN 51 094 317 647. Pepper Asset Finance Pty Limited ACN 165 183 317 Australian Credit Licence 458899 is the credit provider for asset finance loans.