Non-bank home loan lenders in Australia

How we calculate Home Loan Finder Scores

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What different scores mean

9+

Excellent

These home loans offer low costs, coupled with a host of features, giving the best overall value.

7+

Great

These home loans may have slightly higher interest rates or fewer features but overall, a competitive offering.

5+

Standard

Usually the home loans would offer above average rates. They may still include some competitive features.

0+

Basic

Higher costs and/or fewer features.

What is a non-bank lender?

A non-bank lender is an institution other than a bank that offers loan products to consumers.

These lending institutions do not hold a banking licence and therefore cannot hold your money in a bank account.

This doesn't mean they are less trustworthy. They are tightly regulated, as defined by the Consumer Credit Code, which governs all credit transactions in Australia, and by the Australian Securities and Investments Commission (ASIC).

Banks and credit unions are regulated by the Banking Act and are listed by the Australian Prudential Regulation Authority (APRA) as authorised deposit-taking institutions (ADIs). You can see the full list of these institutions on APRA's website.

How does a non-bank lender work?

Non-bank lenders are privately owned, typically relying on wholesale sources to get their funding. While non-bank lenders may not offer all the financial products that a bank does, many have a wide selection of products.

Non-bank lenders come in several forms, including the following:

• Online only lenders. These companies are credit providers operating online, with no branches, usually offering cheap deals.
• Fintech lenders. Similar to an online lender, but these types of home loan providers tend to emphasise their speed and ease of approval as well as their low rates.
• Specialist lenders. Another type of non-bank is lenders with a specialised focus, such as lenders to older Australians or borrowers with bad credit.

Expert insight

"The main difference is that non-bank lenders are not subject to the same lending rules as applied by APRA. This enables customers with less than perfect credit histories and standard income types to still avail of a loan. It may also enable some borrowers additional borrowing capacity through the variations of lender policy that become available outside of the APRA lending guidelines. For example, you may be able to get a loan with less than 3% servicing buffer; Liberty offer 1% and Pepper and Resimac offer a 2% buffer."

Julian Finch

Founder and principal financial specialist, Finch Financial

How to compare a non-bank lender

These basic home loan comparison tips are true for non-bank lenders and any other financial institution.

• Interest rates. A lower interest rate will always save you money – but remember, it's not the most important thing to consider.
• Loan type. What type of loan do you need? You can get a fixed rate home loan or a variable rate one. You can also consider an interest-only repayment option, but most borrowers go for principal-and-interest repayments.
• Loan fees. Fees on home loans matter less than the interest rate, but it's always good to avoid more fees if you can.
• Loan features. The ability to make extra repayments can help you get out of debt faster and pay less interest. However, not all loans allow this. An offset account is another useful feature that lets you save money in a bank account while also reducing your interest costs

What are examples of non-bank lenders?

Here is a list of many prominent small and non-bank lenders operating in Australia.

Finder survey: How many Australians say that lender reputation is important when considering a home loan?

What's the difference between a bank and a credit union?

Definitions here can be tricky. There are credit unions, building societies and similar customer-owned banks. Some of these institutions call themselves banks and are certainly APRA-regulated like the big banks. But these institutions are customer-owned, meaning they don't pay dividends to shareholders and reinvest profits to members and their local communities.

You can visit the Customer Owned Banking Association website to find a list of all its member institutions, some of which do call themselves banks.

These definitions can get technical and rarely matter to the ordinary borrower. Many digital lenders look like small non-banks but are owned by one of the Big Four banks or another Australian retail bank. Some of Australia's newer neobanks are independently owned companies that don't call themselves banks but have banking licences or are in the process of gaining full banking licences.

Can I get a lower rate with a non-bank lender?

Borrowers have experienced rising interest rates between 2021 and 2024, so looking for a lower rate has become more important. Non-bank lenders are actually providing some of the most competitive rates as interest rates rise. They are more likely to have personalised interest rates that change relative to your risk as a borrower.

Online lenders in particular often have cheap deals. They have lower operating costs that allow them to compete with the banks by undercutting the cost of their products. In doing so, the banks have to respond to the competitive market and lower theirs as well.

If you really want to get a sense of which rates are the lowest on the market now, check out our cheapest home loans page. Non-bank lenders typically dominate the list of lowest rates each month.

Expert insight

"Don't be afraid to consider using a non-bank lender. Some borrowers are concerned that they are not familiar with the name of the lender, it's deemed "risky" to deal with. They are lending their money to you and sometimes by being small, they have certain advantages over big banks. They may have policies that are helpful to your circumstances or [be] more willing to consider your loan application, as they can be more nimble. They also run a leaner operation which could help to provide you with a sharper interest rate. While they may not offer all the bells and whistles, such as credit cards, you could keep your home loan with a non-bank lender and then keep your day to day banking with your preferred lender."

Aaron Christie-David

Mortgage broker and managing director, Atelier Wealth

What are the advantages of a non-bank lender?

• Competitive interest rates. Non-banks don't have the same overhead costs as banks and are able to pass on their savings in the form of lower interest rates.
• Faster turnaround. Non-banks often have more digital processes. This means they can work through applications in a much faster time frame.
• Complex lending situations. Also thanks to their less rigid digital processes, non-banks are able to assess a wider variety of borrowers, such as those who are self-employed, have had bad credit or have multiple jobs.
• Personalised service. Because non-banks don't have the same big teams and processes, they can provide much more personalised customer service. They might not have physical branches but they will have other easy ways to get in touch.

Are there any disadvantages to using a non-bank lender?

The potential downsides of a non-bank lender are small and might not apply to every lender.

• Fewer services. Many non-bank lenders offer only a handful of financial products, making it harder to do all your banking in one place.
• No physical branches. If you prefer to do your banking in person, then a more traditional bank would probably be better for you.
• Fewer options. The larger banks offer a broad suite of mortgages that suit most borrowers. Non-bank lenders may have fewer options, and this can be harder if you're a self-employed borrower or if you have bad credit history.
• No deposit guarantee. If a bank is regulated by APRA as an authorised deposit-taking institution, then a customer's savings are protected up to the value of $250,000 if the bank collapses. Non-bank lenders may not fall under this scheme, although some do because they are operating under the banking licence of a bigger bank. As a borrower, this doesn't affect you unless you have money in an offset account, which is essentially a form of savings.

What is Finder Score?

The Finder Score crunches 7,000 home loans across 120+ lenders. It takes into account the product's interest rate, fees and features, as well as the type of loan eg investor, variable, fixed rate - this gives you a simple score out of 10.

To provide a Score, we compare like-for-like loans. So if you're comparing the best home loans for cashback, you can see how each home loan stacks up against other home loans with the same borrower type, rate type and repayment type. We also take into consideration the amount of cashback offered when calculating the Score so you can tell if it's really worth it.

Read the full Finder Score breakdown

Frequently asked questions about non-bank lenders

• What happens if a non-bank lender goes bust?

  As a borrower, your lender going bankrupt wouldn't affect you too much. They've already lent you the money after all. If your lender went bankrupt, you wouldn't magically escape your mortgage debt. You would need to keep repaying your loan. If your old lender gets bought up by a new lender, then they will take charge of your mortgage, but your existing loan contract remains in effect. Learn more: What happens if an online lender goes bust?

  Learn more about what happens.

• How safe are non-bank lenders?

  It is as safe to use a non-bank lender as it is to use a regular bank. Non-banks are tightly regulated by the Consumer Credit Code and the Australian Securities and Investments Commission (ASIC).

• Who are 2nd tier lenders in Australia?

  2nd tier lenders are usually smaller financial institutions who often specialise in home loans and personal banking, and who may not offer other products like credit cards. These lenders include credit unions, building societies and specialised mortgage providers including ING Direct, and Bendigo Bank.

To make sure you get accurate and helpful information, this guide has been edited by Joselle Delos Reyes and reviewed by Aaron Christie-David, a member of Finder's Editorial Review Board.

Written by

Richard Whitten

Editor

Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio

Richard's expertise

Richard has written 562 Finder guides across topics including:

• Home loans
• Property
• Personal finance
• Money-saving tips