What is a non-bank lender? 

5 mins | 4 Jan 2021

What is it about non-bank lenders, us included, that’s different to a ‘traditional’ bank? Let’s a) take a look at how we compare and b) answer some of the more commonly asked questions. 

If you wanted to get a home loan any time before 1992, it was typically off to the bank manager you go. 

It was a time where the internet had barely emerged and the median house price in the country’s most expensive city, Sydney, was only $183,000. 

We were also coming out of the infamous “recession Australia had to have” Keating years –with interest rates hitting 6% in May 1992, coming down from highs of 17% in January 1990. 

With a market ripe for disruption and rates still way too high, non-bank lenders emerged to challenge the big banks. They offered a whole new way to borrow money. 

Where traditional banks used customer deposits for loans – e.g. pay a savings customer 1.5% p.a. on their money, and offer a home loan to borrower using said funds at 3.00% p.a. – non-bank lenders used funds from wholesalers instead. Like Australian and international banks, or by a process known as securitisation. At a significantly lower interest rate to boot! 

Securitisation explained (for detail lovers):

Securitisation is a way for companies to find new sources of funding separate to the banks, which can then be used for loans to borrowers. Mortgages are pooled and their related cash flows are sold to third party investors as securities. Investors are repaid from the principal and interest repayments collected from the mortgage lender. This is all generally invisible to the end borrower.

We’re not a bank and act nothing like a bank. We specialise in home loans, and only home loans. We don’t do bank accounts, or credit cards, or other things banks try to sell you.

Non-banks can typically be a bit more nimble than big traditional banking institutions. Particularly the big four with their large, unwieldy (dinosaur-esque) bureaucratic systems, legions of paid employees, and huge expenses. 

Non-banks tend to be low on overheads, with no branches to speak of for the digital lenders, with an online presence, and far fewer employees. So, if you bypass the big banks and the brokers with non-bank lenders, you can bypass the big built-in costs, as well.

While non-bank lenders used to have a bit of a reputation as the place you only went to when you had no savings or credit history, or you’d been declined by a traditional bank, these days they offer a digital experience and rates you’ll be hard pressed to find in traditional deposit-taking institutions. 

We’re not the ‘end of the road’ we were once perceived to be. More customers are coming to us first!

Let’s look at how the industry is regulated: 

Because non-banks don’t take deposits, we aren’t defined as Authorised Deposit Taking Institutions (ADI’s), so we’re not governed by APRA.

But:

Non-banks must stick to the Consumer Credit Code, which is the regulation for all credit transactions. We need a credit licence and are governed by responsible lending obligations under the Australian Securities and Investment Commission (ASIC).

In other words:

Non-banks have a credit licence (for loans) rather than a banking licence (for deposits and loans). And we’re well-governed and reputable. 

What happens if a non-bank lender goes bust?

Some non-bank lenders have better customer-led practices than others. Like any significant financial relationship in your life, don’t take it at face value. Do your due diligence to make sure the lender’s values match your own.

Here’s what to research if you’re unsure about a particular non-bank lender. And in case you’re wondering about Athena Home Loans, we’ve included a bit about us.

Athena Home Loans - Of course, we’re gonna say yes, but there are some good reasons why you should. One, we’re well funded by the might of AirTree Ventures, Apex Capital, AustralianSuper, Hostplus, Macquarie Bank, RESIMAC Group, Rice Warner, Square Peg and Sunsuper. Two, we’re led by a trusted leadership team who all have a track record of delivering successful and innovative customer solutions. And three, we use bank level security and encryption across our digital platform, so you get all the online benefits without the dangers. We also have our Australian Credit Licence (502611 if you need to know), so it means we’re governed by ASIC and legally bound to follow their compliance rules. 

Athena Home Loans - Some of our big investment backers include AirTree Ventures, Apex Capital, AustralianSuper, Hostplus, Macquarie Bank, RESIMAC Group, Rice Warner, Square Peg and Sunsuper.

Athena Home Loans - We don’t charge you any fees and charges at all – application, ongoing or exit.

Athena Home Loans - We will never give new customers better rates than our existing customers for a like for like loan. 

Athena Home Loans - You can get a quick quote in 5 minutes and it takes 15 minutes to apply for pre-approval (but you can take your time).

Athena Home Loans - You can manage your home loan via your online dashboard called Home Hub. Access your transaction history, see your loan balance, redraw balance, loan details and make payments in and out of your redraw. It’s been designed for an optimised mobile experience but also works brilliantly on any device. 

Athena Home Loans - You can move whatever you want in and out for free.

Athena Home Loans - Yes. Our redraw breaks free from expensive and restrictive redraws that used to exist. It makes life easier, avoids the costs of an offset, and pays off your loan faster. By making extra payments you instantly reduce your principal loan balance and the interest you’re charged. Athena reduces the amount of your home loan balance by 100% of the amount in your redraw. 

Athena Home Loans - Athena is not a bank and never will be. That means we’re not covered by the government’s financial claims scheme, which guarantees traditional offset accounts up to $250,000 if bank lenders fail. But don’t worry. If something was to happen to Athena (very unlikely, we have big backing and are here to stay!) we have contracts in place where a back-up servicer can honour your loan and agreements you have with us. 

Athena Home Loans - Trustpilot and Google are two great places to go if you want to see what others are saying about us.

Athena Home Loans - Our home loan experts are available 7 days a week and we’re Australia-based. Take us for a test run:

Send us a text – 0429333555

Call us – 133535

Shoot us an email – hello@athena.com.au

At Athena, we like to think we ace the non-bank lender test. We serve up red hot rates and home loan hacks to help you pay your loan off sooner. So, if you’re looking for a better deal than your current bank lender, get in touch.