Q: What Are the Types of Lenders In Australia?

These are the types of lenders in Australia: Banks: This is the most common type of lender, offering a wide range of home loan products. They are well-established and have a strong reputation. Examples are CBA, Westpac and Macquarie. Non-banks: These lenders are not owned by banks and often offer more competitive interest rates than banks. Examples are Athena, La Trobe Financial and Pepper Money. Retail Lenders (via Wholesale Non-Banks): These lenders source funds from wholesale non-banks and offer loans under their brand. They are regulated by the National Consumer Credit Protection Act and are required to be licensed or registered with ASIC. Specialist Non-Banks: These lenders specialise in offering loans to people who do not fit the normal lending criteria, such as those with poor credit or unusual property characteristics. Credit Unions and Building Societies: These lenders are owned by their members and offer competitive interest rates and fees. They are often local and serve specific geographic areas or groups of people. Private LendersThese lenders are not affiliated with banks or credit unions and can provide funding to individuals and corporations. They are often more expensive than traditional lenders but offer flexibility in lending criteria.

Question 1

How did we review the banks?

Accepted Answer

We based our review on much more than just price. We wanted to focus on if they deliver a great result for their customers.

Competitive interest rates

We all love low interest rates! We didn’t just look at the price today. Instead, we looked at their historical pricing and if they tend to be competitive or if they lag behind the other banks.

What about specialist lenders? These lenders use a rate for risk model where different customers are charged different rates and fees. We looked at if they are charging fair rates for what they offer.

Flexible credit policies

Do they approve home loans for good people and decline loans for the right reasons? Do they see you as a human being or just a number?

Many of the major lenders use a computer algorithm called credit scoring these days. In these cases, we looked at if their credit score was accurate, if it discriminated against particular borrower types and if it could be overridden where it was clearly inaccurate.

Speed and reliability

If you’re refinancing, then you probably don’t mind if your home loan is delayed a few weeks. However if you’re purchasing, the same delays will cause a mental breakdown. In the worst cases, people miss out on their dream home because their bank is too slow.

Banks have special offers and get swamped by applications all the time so be aware that right now they may be slower or faster than we’ve assessed. What we’re looking at is if they tend to get things right or tend to let our customers down.

Reputable or dangerous

Every lender has a clause in their loan agreement that allows them to vary your interest rate.

The question is can you trust them?

The GFC was the perfect example of a time when the banks had the opportunity to gouge their customers. Which ones took advantage of their customers and which didn’t?

Some lenders also got slammed by the media and customers when in fact they’d reacted to a real increase in their cost of funds. The general public can’t always tell the difference, but we can!

This also takes into account if they’re genuinely there to help customers or if they’re genuinely there to help their shareholders! Customer owned banking gets a big tick in this area.

Question 2

Who is the reviewer?

Accepted Answer

Otto Dargan is the Founder of mortgage broking firm Home Loan Experts. He’s won Australia’s Brightest Broker twice! That’s no mean feat considering there’s around 11,000 mortgage brokers in Australia.

Otto combines extensive mortgage broking experience, great contacts within the industry, property investment and a passion for helping customers to get a better home loan.

Question 3

What Are the Types of Lenders In Australia?

Accepted Answer

These are the types of lenders in Australia:

Banks: This is the most common type of lender, offering a wide range of home loan products. They are well-established and have a strong reputation. Examples are CBA, Westpac and Macquarie.
Non-banks: These lenders are not owned by banks and often offer more competitive interest rates than banks. Examples are Athena, La Trobe Financial and Pepper Money.
- Retail Lenders (via Wholesale Non-Banks): These lenders source funds from wholesale non-banks and offer loans under their brand. They are regulated by the National Consumer Credit Protection Act and are required to be licensed or registered with ASIC.
- Specialist Non-Banks: These lenders specialise in offering loans to people who do not fit the normal lending criteria, such as those with poor credit or unusual property characteristics.
Credit Unions and Building Societies: These lenders are owned by their members and offer competitive interest rates and fees. They are often local and serve specific geographic areas or groups of people.
Private LendersThese lenders are not affiliated with banks or credit unions and can provide funding to individuals and corporations. They are often more expensive than traditional lenders but offer flexibility in lending criteria.

Question 4

Which is Better: Credit Unions, Banks or Non-banks?

Accepted Answer

When deciding which type of lender is best for you, consider factors such as your financial goals, credit history, and the services you need. Credit unions are known for their member-centric approach, lower fees, and more competitive interest rates. Banks, on the other hand, are for-profit institutions that prioritise shareholder interests and may offer a broader range of services. Non-banks can provide specialised lending options but often come with higher costs.

Question 5

What Should I Consider When Choosing a Lender?

Accepted Answer

Reputation and Reliability                  Research the lender's reputation and reviews from independent sources.                    Ensure the lender has a professional website with relevant information,        such as an Australian Business Number (ABN) and Australian Credit        Licence (ACL) number.                    Ensure the lender is licensed by the Australian Securities and        Investments Commission (ASIC) and is a member of the Australian        Financial Complaints Authority (AFCA).                    Check if deposit-taking institutions are licensed and supervised by the        Australian Prudential Regulation Authority (APRA).                  Product Offering                  Consider lenders that specialise in the type of loan you need, such as        low-deposit home loans, bad credit home loans or loans for self-employed        borrowers.                  Interest Rates and Repayments                  Compare interest rates, fees and repayment terms across multiple        lenders.                    Be wary of deals that seem too good to be true. There may be hidden        costs or restrictions.                  Customer Support                   Choose a lender with helpful and responsive customer support who is        willing to work with you to find the right loan.

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