3 Key Reasons To Consider Non-Bank Lenders

22 Dec 3 Key Reasons To Consider Non-Bank Lenders

Long-established banks are often considered by many Kiwis as the first port of call when it comes to lending. They’re usually seen as having the best home loan features, the most competitive interest rates, and a superior level of service. But there’s another type of lender, sometimes overlooked, that compares just as favourably: the non-bank lender. Non-bank lenders are often a solution for those with bad credit, low deposit or self-employed income.

Find out what you need to know about non-bank lenders along with three reasons to consider this type of lender.

What are non-bank lenders?

Non-bank lenders are financial institutions that provide home loans, personal loans and business loans outside the mainstream banks. They may offer competitive home loan rates and flexible loan features. Unlike traditional banks, non-bank lenders are regulated by fewer government bodies. That means they have fewer regulations and are usually less restrictive. And because they’re mostly usually privately-owned businesses, they don’t tend to have rigid rules or policies.

Borrowers struggling to meet banks’ lending requirements, in terms of credit history, employment history or deposit, may still qualify for lending with a non-bank lender. And while borrowers will still need to meet non-bank specific lending criteria, non-bank lenders are generally more flexible and accommodating when it comes to lending and structuring loans.

Are non-bank lenders safe?

Non-bank lenders still have to comply with many of the lending rules that the banks do, and they can be as safe as the big banks. And just as they are with the banks, loan applications with non-bank lenders are only approved if the borrower meets lending criteria and credit assessment requirements. So borrowers still need to show they can afford to repay their home loan.

Why consider non-bank lenders?

When it comes to securing home loans NZ wide, there are three key reasons why borrowers may consider non-bank lenders: bad credit home loans, low deposit home loans, and self-employed home loans. Let’s break down each of these further.

Bad credit home loans

Having bad credit doesn’t mean you’re untrustworthy. Many Kiwis end up with bad credit because of an unfortunate event that’s out of their control. A broken relationship, unexpected unemployment, or a critical illness can leave them unable to repay their debt and facing bad credit. But that doesn’t necessarily mean the end of the road when it comes to borrowing.

In many instances, non-bank lenders can help borrowers secure bad credit home loans, even when they’ve been turned down by the bank. At Max Mortgages, we don’t believe someone should be blocked from getting finance because of past mistakes. So we work with a broad range of non-bank lenders that offer more flexible lending criteria suited to borrowers with bad credit history. If you’ve had bad credit in the past, you may be able to secure finance from a non-bank lender.

Low deposit home loans

When loan-to-value ratio (LVR) restrictions were first introduced in October 2013, many first home buyers found themselves unable to secure home loans because they fell short of traditional banks’ deposit requirements. Most banks expect borrowers to have at least a 20 per cent deposit, and under the LVR restrictions, are limited to no more than 10 per cent of their new mortgage lending to owner-occupiers with less than a 20 per cent deposit.

Unlike traditional banks, non-bank lenders are not subject to LVR restrictions which means they have more flexibility around low deposit lending. So for borrowers struggling to get bank finance approval because of a low deposit, non-bank lending could be a solution.

Self-employed home loans

Mainstream banks are generally more restrictive when it comes to lending to borrowers without regular, guaranteed income. Many self-employed Kiwis struggle to get home loans from traditional banks because they haven’t been trading long enough, they’re on a fluctuating income, or they can’t provide the financial information banks require.

Thankfully there are options for borrowers who don’t meet banks’ proof of income criteria, and non-bank lenders are often the next step because of their flexibility. Many of these lenders will consider alternative methods for verifying income, and don’t rely solely on payslips or financial statements. If you are self-employed and struggling to secure home loans with mainstream banks, check out these tips for buying a home when you’re self-employed.

Which lender is right for you

Buying a home in today’s lending environment is challenging. Borrowers who don’t quite meet banks’ lending criteria – because of bad credit history, a low deposit, or self-employed income they’re unable to prove – are often at risk of being declined. But there is a solution: non-bank lenders with flexible home loan solutions and competitive interest rates and features, are ideal for borrowers who don’t fit banks’ strict criteria.

Work with Max Mortgages to find a non-bank lending solution to fit your requirements. Talk to a Max Mortgages Adviser today to find out more about non-bank lending options.

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