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Promoted by loans.com.au
While the bigger banks in Australia still dominate the market, non-bank lenders have been increasing their market share over the last few years. Non-bank lenders offer a legitimate alternative to the bigger banks and have created a competitive environment to the advantage of borrowers who have realised their benefits.
If you’re an investor, here’s why you should consider choosing a non-bank lender for your investment loan.
How do non-bank lenders differ from bigger lenders?
Borrowers have three types of lenders to choose from when it comes to home loans: non-bank lenders, mutuals, and banks. Mutuals and banks offer deposit accounts and are classified as authorised deposit-taking institutions (ADIs). Mutuals and banks are both regulated by the Australian Prudential Regulation Authority (APRA).
On the other hand, non-bank lenders do not issue deposit accounts themselves, such as term deposits or savings accounts and are not regulated by APRA because they’re not classified as an ADI. However, they do still have to abide by National Consumer Credit Protection laws and are regulated by the Australian Securities and Investment Commission (ASIC).
One of the biggest misconceptions about non-bank lenders is that they aren’t as safe as traditional banks because they aren’t regulated by APRA. Some people believe that non-bank lenders are more vulnerable in unstable economic times, or that interest rate rises would be more likely to be passed on by smaller lenders.
However, neither of these are necessarily true. Both banks and non-banks must comply with laws and industry codes. Some non-bank lenders like loans.com.au also focus on safer borrowers and offer rates that rival those of the bigger banks.
Another perceived drawback of a non-bank or online lender is that there are no physical branches.
“But what our team at loans.com.au likes to say, we can have customers on the phone and apply for their home or investment loan before the time it would take to get in the car and drive to the local branch,” Marie Mortimer, Managing Director of loans.com.au said.
“We’re also open and available to assist outside of the typical bricks-and-mortar 9-5 pm, with our lending specialists taking calls from 7 am-7 pm, and our live chat team available to assist from 7 am-12 am. That’s great service!”
What are the advantages of choosing a non-bank lender?
Unlike the big banks, non-bank lenders are not weighed down by the cost of having multiple branch networks and a big corporate structure.
“As investors, you want the process to be as seamless as possible. By choosing a non-bank lender, the service is exceptional and you’ll likely get a faster turnaround time than with a bank,” Ms Mortimer said.
“Also, with loans.com.au being an online non-bank lender, we have no physical branches, so there are less overhead costs, meaning we can pass savings on to our customers.”
Another benefit of non-bank lenders is their fast turnaround times. Given that speed to market is key for investors in the current climate, conventional banks are becoming a less enticing option for borrowers who need to pounce on a purchase.
“Obviously in the current market, some buyers are facing difficulty buying a property due to the fierce competition of home buyers around Australia,” Ms Mortimer said.
“This means it's important to choose a lender you can trust to get you to settlement as soon as possible. These days, major banks can take weeks if not months to settle, so you may find it considerably faster to choose a non-bank lender, such as loans.com.au or Firstmac.”
loans.com.au and Your Investment Property are associates of Firstmac. Photo by Bench Accounting on Unsplash
