In Australia, the Big 4 Banks are top of consumers’ mind when it comes to taking out a loan, whether it be for business or personal use. However, in light of the recent Royal Commission into Banking, smaller independent lenders are hot on the banks’ tails and almost 36% of potential borrowers have enquired at an independent lender in the last 6 months. In this article, we will discuss the pros and cons of taking out a loan through non-bank lenders.
Please note that the information in this article is intended as general advice only and does not take into account your specific needs, financial objectives or personal circumstances. For tailored advice, please contact Speedy Finance directly.
Are independent lenders safe?
The short answer: yes. Here’s why.
Personal loans are a financial product that is regulated by the Australian government. Any lender offering regulated loan products must adhere to the National Consumer Credit Protection Act (2009), which requires them to provide set information to every potential borrower and assess whether the borrower can realistically afford to make repayments. These rules apply to all lenders who offer regulated loan products in Australia, including banks, credit unions, fintech companies and independent lenders.
In summary, there is really no difference in the safety of a loan from a bank compared with an independent lender. However, there are various benefits and drawbacks of obtaining loans from an independent lender which we explain further below.
Big banks use set policies and systems to determine whether your loan application is viable. These policies are usually inflexible, so if you do not meet just one criterion on the list then your loan can be rejected without explanation. Small lenders, on the other hand, have the flexibility to look at each application individually and make a manual decision as to whether or not the loan is suitable. Whilst independent lenders must still adhere to NCCP regulations, they are not reliant upon computer systems that can’t be overridden.
An independent lender usually spends all of their time working on loan deals in their local area, so has knowledge that rivals the competition. Bank staff are responsible for a wide range of products and customers, and so often do not have the time nor dedication to really get to know the markets.
Due to the lower volume of loans and products, independent lenders are able to provide excellent customer service to their clientele. Not only is your application likely to be processed faster, you will also have a personal point of contact who will get to know you and your personal situation in order to provide the best loan options. In case you have questions about your contracts or are suffering hardship, you will have a direct contact to call rather than being forced to explain your situation over and over again to a bank’s call centre.
Limited loan options
The main downside of independent lenders is that they are only able to offer limited loan products, whereas banks have the resources to offer an entire suite of products. Having said that, the products offered by banks often have only slight variations with no real benefit to the customer, so the service and flexibility offered by independent lenders can offset this lack of choice.
Whether you are looking for a personal loan for a family holiday or a business loan to open a new store, Speedy Finance can help. Speak with a Speedy Finance consultant today to see how this independent lender can help you beat the banks.