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Non-bank lenders are becoming a popular option for many borrowers looking to refinance their home loans but are they any better than traditional banks?

Salvest managing director Anthony Ferrero said non-bank lenders gained popularity in recent years as they offer alternative financing options to those borrowers who might not fulfill the strict criteria established by traditional banks.

“AUSTRAC expects this to grow by almost 10% a year through to 2024 with non-bank lenders offers greater flexibility, and better long-term outcomes for partners,” he told Your Mortgage.

Advantages of non-bank lenders

Mr Ferrero said non-bank lenders provide more flexible lending terms, quicker approvals, and a willingness to consider borrowers who might be deemed higher risk by traditional lenders.

“Non-bank lenders offer several advantages to home loan borrowers compared to traditional banks during interest rate hikes,” he said.

Here are some of the advantages of non-bank lenders during rate hikes: 

Flexibility in underwriting

Mr Ferrero said non-bank lenders often have more flexible underwriting processes, as they can take a more holistic approach to assess a borrower’s creditworthiness and ability to repay.

“They consider factors beyond strict financial metrics, benefiting borrowers who may not meet the stringent criteria of banks,” he said.

Competitive pricing

Operating in a more competitive lending market, non-bank lenders may adjust their pricing more quickly in response to interest rate changes.

Quick approval

In times of interest rate hikes, borrowers may need to act promptly to secure advantageous rates or finalise their loan terms — non-banks can help them.

Non-bank lenders frequently employ efficient processes and leverage technology to accelerate the approval and funding of loans.

Specialised loan products

Non-bank lenders often provide specialised loan products that are customised to meet the specific needs of borrowers.

These include offerings may include variable rate home loans with rate caps, hybrid loans that combine fixed and variable rates, or alternative loan options designed for self-employed individuals or borrowers with unique financial circumstances.

What to consider when applying to a non-bank lender

Mr Ferrero shared several factors that should be considered when applying for a home loan with a non-bank lender:

Reputation and credibility

It is important to conduct thorough research and evaluate the reputation and credibility of a lender.

“Look for reviews, testimonials, and feedback from other borrowers. Check if the lender is licensed and regulated by the appropriate authorities,” Mr Ferrero said.

Interest rates and fees

Due to the elevated risks they undertake, non-bank lenders frequently apply higher interest rates and fees compared to traditional banks.

“It's important to carefully evaluate the interest rates, fees, and any additional costs associated with the loan — compare these rates with other lenders to ensure you're getting a fair deal,” Mr Ferrero said.

It is also important for borrowers to consider the impact of these costs on their overall financial situation and ability to repay the loan.

Loan terms and conditions

Mr Ferrero said borrowers must also ensure that they review the loan terms and conditions presented by a non-bank lender.

“Understand the repayment schedule, including the duration of the loan, interest rate adjustments, and any penalties or fees for early repayment — ensure that the loan terms align with your financial goals and capabilities.”

Transparency, disclosure, and customer support

A reputable non-bank lender should prioritize transparency and provide clear information about all aspects of the loan.

Mr Ferrero said they should openly communicate details such as interest rates, fees, repayment terms, potential penalties, and any other relevant terms and conditions.

“Borrowers should also evaluate the customer service and support offered by the non-bank lender. Consider their responsiveness, accessibility, and willingness to address your inquiries or concerns.”

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market from non-bank lenders.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees Max LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkComparePromoted ProductDisclosure
6.04% p.a.
6.06% p.a.
$3,011
Principal & Interest
Variable
$0
$530
90%
4.6 STAR CUSTOMER RATINGS
  • Available for purchase or refinance, min10% deposit needed to qualify.
  • No application, ongoing monthly or annual fees.
  • Dedicated loan specialist throughout the loan application.
Disclosure
5.54% p.a.
5.95% p.a.
$2,852
Principal & Interest
Fixed
$0
$0
80%
  • Only 10% deposit required
  • No hidden fees
  • Fast approval with Tiimely Turnaround
Disclosure
5.99% p.a.
5.90% p.a.
$2,995
Principal & Interest
Variable
$0
$0
80%
  • A low-rate variable home loan from a 100% online lender.
  • Backed by the Commonwealth Bank.
Disclosure
5.69% p.a.
6.16% p.a.
$2,899
Principal & Interest
Fixed
$0
$530
90%
  • Available for purchase or refinance, min 10% deposit needed to qualify.
  • No application, ongoing monthly or annual fees.
  • Flexibility to split your loan with both fixed and variable rates
Disclosure
5.99% p.a.
6.00% p.a.
$2,995
Principal & Interest
Variable
$0
$0
90%
6.10% p.a.
6.13% p.a.
$3,030
Principal & Interest
Variable
$0
$0
80%
6.24% p.a.
6.24% p.a.
$3,075
Principal & Interest
Variable
$0
$0
50%
6.39% p.a.
6.39% p.a.
$3,124
Principal & Interest
Variable
$0
$0
60%
6.59% p.a.
6.86% p.a.
$3,190
Principal & Interest
Variable
$295
$0
95%
7.29% p.a.
7.36% p.a.
$3,424
Principal & Interest
Variable
$0
$545
80%
7.39% p.a.
7.66% p.a.
$3,458
Principal & Interest
Variable
$295
$0
85%
7.74% p.a.
8.00% p.a.
$3,579
Principal & Interest
Variable
$15
$1,325
70%
5.99% p.a.
6.51% p.a.
$2,995
Principal & Interest
Variable
$0
$530
90%
  • No application, ongoing monthly or annual fees.
  • Available for refinance or purchases. Quick and easy online application process.
  • Dedicated loan specialist throughout the loan application.
  • Discounted interest rate for 5 years for homes with an eligible solar system
Disclosure
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

Important Information and Comparison Rate Warning

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