Non-bank lenders explained

What is a non-bank lender?

A non-bank lender is a lender that is not a bank. It is a business that lends money but does not hold your savings or run everyday transaction accounts. The Reserve Bank describes non-bank lending as being mainly undertaken by registered financial corporations, along with some managed investment funds.

Because they do not take deposits, non-banks pay for loans in other ways. According to the RBA, securitisers mostly use warehouse facilities, largely provided by banks, and then sell loans into the securitisation market. Other non-banks rely on loans and equity from specialist lenders, wealthy individuals and family offices.

Day to day, a borrower may not notice much difference. The application, valuation and settlement steps look familiar. The differences show up in policy, speed, flexibility and cost. At Ownright Custom Finance we arrange loans through banks, non-banks and private lenders Australia-wide, and the right fit depends on the file.

How big is the non-bank sector in Australia?

The RBA’s March 2023 analysis found non-banks hold roughly 5% of financial system assets, and a little under 5% of total credit. Housing lending by non-banks has grown quickly in recent periods, though from a small base compared with the major banks.

The size matters less to you than the point it illustrates: this is a recognised, regulated part of the market, not a fringe. Non-bank lenders compete for particular types of borrower rather than trying to be everything to everyone.

Who do non-bank lenders typically serve?

The RBA notes non-banks serve borrowers that banks have underserved, such as the self-employed, borrowers with low documentation and those in cyclical industries. It also reports they lend more to investors and self-employed borrowers, and that outside housing they provide construction finance, SMSF loans and some business and personal finance.

In practice, borrowers who look at non-bank options include:

• Self-employed people with complicated or incomplete paperwork.
• People with a credit blemish who still have equity or a strong deposit.
• Investors and developers who need flexible structures.
• Borrowers with unusual properties or income sources.
• People who were declined elsewhere and need another option.

If you fit one of these groups, the non-bank home loans page explains how we arrange them.

How do non-banks differ from banks?

Feature	Bank	Non-bank
Takes deposits	Yes	No
Funding source	Deposits and wholesale markets	Wholesale funding, securitisation, investors, own capital
Prudential regulation	APRA-regulated	Lighter touch, some registered with APRA above a size threshold
Policy flexibility	Often tighter	Often more flexible for niche files
Products	Broad, with everyday banking	Focused lending products
Typical cost	Often lower	Can be higher, the RBA reported non-bank housing rates above major banks

On regulation, the RBA says non-bank lenders face fewer regulatory constraints than banks, and corporate non-banks with debt assets above $50 million must register with APRA as registered financial corporations. That is about financial stability. For consumer protection, non-bank lenders that provide credit to consumers still operate under credit licensing and responsible lending law, which ASIC administers.

Are non-bank lenders more expensive?

Often, though not always. The RBA reported that non-bank housing pricing sat above the major banks in recent years, with the gap widening in 2022. That reflects higher funding costs and the extra risk some non-bank borrowers represent.

We do not publish rates because every loan is priced on circumstances, and a non-bank loan can sometimes be the sharpest option for a borrower whose file would be declined by a bank. The sensible question is not whether non-bank loans cost more than the best bank rate in the market, but whether it is the best available outcome for your situation, and whether there is a plan to move later.

Moneysmart’s guidance on switching home loans applies equally here: check break fees, discharge fees, application fees and any lenders mortgage insurance, and watch for switching costs that cancel out savings. Those points matter when you move into a non-bank loan and again when you move out.

What do non-bank lenders look at?

Policies vary, but the common themes are:

• Income evidence. Some offer low doc or alternative doc options, as our low doc home loan requirements checklist explains.
• Credit history. Many will consider a blemish if it is explained and recent conduct is good.
• Equity and loan-to-value ratio. Strong equity widens options.
• Property type. Some specialise in unusual or higher-risk properties.
• Purpose of the loan. Investment, construction and refinance each have their own rules.
• Your plan. Particularly for shorter-term loans, a clear exit matters.

ASIC’s responsible lending obligations apply to credit licensees providing credit assistance or credit to consumers: inquire, verify and assess that the loan is not unsuitable. A non-bank lender or broker still has to do that work.

Where do private lenders fit in?

Private lenders are a subset of the wider non-bank world, typically funded by private investors and focused heavily on the property and the exit. They tend to move on different timelines and apply different tests from mainstream non-banks, and they are often used for shorter-term needs.

If you want to compare, the private lender vs bank guide walks through the differences, and the private lenders in Australia page explains how we arrange those loans.

What does a worked example look like?

This is an illustrative scenario only and does not describe a real client.

A self-employed builder has income that varies from year to year and a property with solid equity. His bank has said his latest year is too low to support a refinance. He has no defaults, though his tax returns show heavy deductions.

His broker approaches a handful of non-bank lenders whose policies allow assessment of a longer income average and certain add-backs. One accepts the file on a low doc basis with a clear plan to review the loan after a set period. The cost is somewhat above what a bank would offer a borrower with a cleaner profile, but it unlocks the refinance he needed and gives him a pathway back to a mainstream lender. Every case differs, and nothing is guaranteed.

What are the risks and trade-offs?

Honest advice includes the downside:

• Cost. Non-bank loans can be more expensive.
• Terms. Some include features that limit flexibility, such as higher fees for early exit.
• Shorter horizons. Specialist loans are sometimes designed as a stepping stone.
• Refinance risk. If your file does not improve, moving to a bank later may not be possible.
• Less familiar names. Check who you are dealing with. Moneysmart suggests using ASIC’s Professional Registers Search to confirm a licence.

Asking how the loan works, what it costs to leave and what the realistic exit is should be part of any conversation, including with us.

How does Ownright approach non-bank lending?

We do not start with a lender, we start with your goal. Trevor Scott and the team work through your situation, check whether a bank can still do the job, and if not, look at which non-bank and private options suit the file. That includes lenders and structures that most brokers never mention.

We explain the trade-offs plainly, including cost and how to exit. We work Australia-wide from our head office in Knoxfield, Victoria, and we never promise approval ahead of time. If you want to see what might be possible, start a conversation on our apply page.

How does a non-bank loan usually work from start to finish?

The steps look much like a bank loan, with a few differences in emphasis:

1. Conversation and file review. Your broker works out what you need and what evidence you have.
2. Lender matching. The broker identifies lenders whose policy suits your income, credit and property.
3. Application and assessment. Documents are submitted, and the lender carries out the inquiries and verification ASIC’s responsible lending rules require.
4. Valuation and conditions. The lender values the property and sets conditions for approval.
5. Formal approval and settlement. Documents are signed and funds flow at settlement.

Timeframes depend on the lender, the security and how quickly documents arrive. Some non-banks can be faster than a major bank on certain files, though that is never guaranteed, and some are slower. Tell your broker about any deadline up front.

Can I move from a non-bank loan to a bank later?

Often that is the plan. A non-bank loan used for a specific purpose can be a bridge while a tax debt is cleared, a business matures or a credit file recovers. Once the situation changes, a refinance to a mainstream lender may bring a lower cost.

The catch is that you need to leave the way you intended. Before signing, ask about early exit costs, minimum terms and what the lender would want to see for you to refinance successfully. Moneysmart lists break fees, discharge fees and application fees as items to check when switching, and those matter just as much when you leave a non-bank loan. Our guide on how to refinance when your bank says no covers the other side of that journey.

Do non-banks lend for more than home loans?

Yes. The RBA notes that outside housing, non-banks lend for construction, SMSFs and some business and personal finance, and that they generally have looser construction lending standards than banks. For borrowers, that means non-bank options can exist for self-managed super fund property purchases, development finance, commercial property and short-term business needs, each with its own rules.

Because each product has its own policy, matching the right lender matters even more outside the standard home loan. If you are exploring a more specialised purchase, say so up front. Our team arranges those loans Australia-wide.

What questions should I ask a non-bank lender or broker?

Ask who the lender is and how it is funded, what the loan costs to establish and to leave, whether there is a minimum term, what happens at the end of the term, how the lender expects you to exit and how complaints are handled. Confirm that the lender or broker is registered by checking ASIC’s register, as Moneysmart suggests. A good broker will answer each question plainly and in writing, and will happily compare the non-bank option with a bank option so you can see the trade-offs side by side.

What mistakes should I avoid?

• Assuming non-bank means risky. It is a recognised, regulated sector, though terms vary widely.
• Focusing only on the rate. Fees, term and exit rules matter.
• Skipping the exit plan. Know how you will move on.
• Applying to many lenders at once. Each application can leave an enquiry on your credit file.
• Not checking the licence. Use ASIC’s register.
• Not asking what happens at the end of the term.

What should I have ready?

• ID and proof of address.
• Income evidence: tax returns, BAS, bank statements or accountant’s letter.
• Details of current loans and the property.
• A summary of why you were declined or why you are looking beyond banks.
• Your timeline and your plan for what happens next.

With these, a broker can quickly narrow the field. Call Ownright Custom Finance on 03 7043 7233 or send your details and we will explain which kinds of lender might suit you.