What’s the difference between non-bank lenders and banks?

When it comes to home finance, selecting the right loan product for a client's unique situation requires access to a range of options to compare against their needs. Both bank and non-bank lenders have advantages depending on the borrower, so it’s important to know the differences between the two.

It's worth mentioning that both banks and non-bank lenders have to abide by the same laws, rules and regulations in Australia. This includes the NCCP act which governs all credit transactions and the Australian Securities and Investments Commission which requires lenders to be transparent with fees, rates and make this information readily available when requested.

While the right loan and lender is dependent on a borrower's needs here are some insights on the general pros and cons of bank and non-bank lenders.


Some borrowers feel safer with banks - particularly the Big 4. They're often more established institutions and hold the majority of the Australian mortgage market. Banks have an extra level of regulation under the Australian Prudential Regulatory Authority who ensure that, under all reasonable circumstances, financial promises made by institutions are met

Banks usually have stricter criteria to meet and some banks pass on higher overhead costs through their fees

Non-bank lenders

These institutions often deliver more competitive rates for borrowers. They can often provide options for borrowers who don't meet bank lending criteria. They often have lower setup and ongoing costs.

They can often provide options for borrowers who don't meet bank lending criteria because they're self employed, have a lower credit rating or have been declined a loan in the past. Non-banks have been known to provide a more personalised service and be more flexible to a borrower's needs and requirements.

Being smaller institutions, non-bank lenders can be more vulnerable to economic conditions and

may have fewer products available.

At the end of the day, the right loan and lender is dependant on each individual client’s personal needs. Mortgage brokers - who have access to a variety of different lenders - can help borrowers of all kinds make the right decision.