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Is a bank or non-bank lender best?

Navigating the home loan market can be overwhelming, with a myriad of lenders and loan options out there. Choosing to go with a bank or non-bank lender is one factor to consider, and we’re often asked by our clients which one is best. Big brands bring us feelings of comfort. They are names that we know and trust (or at least partially trust) and we expect to be around in the future. However, how much are you paying for the brand and do you need all the features and benefits continuously thrown at you? On the other hand, just how secure is a non-bank lender or smaller credit union?

John Symond of Aussie Home Loans wasn’t the first, but he was certainly one of the most vocal proponents of the non-banking lenders with his slogan ‘We’ll save you’. Aussie Home Loans managed to enter the market and undercut the banks, driving real value for mortgage payers. Back then, you had to be pretty game to take out a loan with the unknown underdog. But as brands built over time, it became more acceptable and attractive to try one of these ‘new lenders’ because they were so much cheaper.

Both banks and non-bank lenders have pros and cons. Here are some of the main ones help you determine which option is right for you.

Reasons why you’d want to use a non-bank lender:

Better deals

The big banks have a powerhouse of infrastructure behind them, and while as a client you want to be supported, this costs money. A non-bank lender often won’t have the overheads of a big bank, and accordingly, pass cost savings to you.

Go the extra mile

Non-banks have to work harder to keep you as a customer. They may have a more relaxed credit policy, they may pass on more of the rate cuts or they may offer a highly personalised service. Whatever it is, they need to be doing some things better than the big banks because you’re buying on logic rather than emotion.

More relaxed credit policies

Getting a loan from a bank usually involves going through a cookie cutter approval process, whereas non-banks are often more flexible. If you’re self-employed for example, a lack of pay slips and financial information can make getting loan approval challenging. However some non-bank lenders out there are willing to lend money without pay slips or even a tax return.

While that all sounds great, a non-bank lender isn’t for everyone. Some people prefer to go with a bank for the following reasons:

In-person contact

For some people, face to face contact just can’t be beaten. Talking on the phone or communicating via email can be frustrating and sometimes you just want to walk into a bank branch and yell at someone.

Multiple services in one place

Most banks offer credit cards, car loans, savings accounts and term deposits and some people like the convenience of having all of their financial matters in the one place.

Improved customer experience

Because banks are making billions of dollars in profit, they can drop millions of dollars into developing new solutions for customers, such as apps and improved online experiences. Smaller non-banks generally can’t keep up with this level of investment.

There isn’t any clear cut winner between the big banks and the non-bank lenders. Everyone is going to have different needs and biases, and you have to choose your lender accordingly. Whichever one you select, just don’t remain complacent. Review your loan regularly to check if you could be getting a better rate or more features than what you have currently.

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Whether you’re buying a home, an investment property, looking to renovate or simply want to check you’re getting the best deal on your mortgage, Orium Finance are experts that make it easy.

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Call 02 8330 3700 or email info@orium.com.au