The difference between a bank and non-bank lenders


Are you ready to buy a new home and look into the home loan application process? Applying for a home loan is a major aspect of purchasing a home and can seem overwhelming to some.

There is a selection of lenders you can choose from, allowing customers to find the lender best suited to them. But to some, this can create more confusion. It’s important to remember in Australia, there are two different types of lenders – bank and non-bank lenders.

This article explores the difference between a bank and non-bank lenders, helping you decide what option may be best for you.

Uptain - Blog The difference between a bank and non-bank lenders
Uptain - Blog What is a non bank lender

What is a non-bank lender?

When it comes to home loans, most people automatically think of going through the bank. This is because non-bank lenders don’t have branches, haven’t been around as long as banks and they’re much smaller, so they have far less brand recognition. But with banks lending criteria increasingly tightening, Australians are now more than ever looking to non-bank lenders.

Because we are so used to the banks being the place to get your home loan, understanding how a non-bank lender operates can seem confusing. The truth is, it’s not as complicated as you might think.


A bank has two sides to it. One is where you can deposit money into your bank account and the other is the lending side where you can borrow money. Traditionally banks make their money by making the interest on loans higher than the interest they pay on deposits. They do this to cover the costs of their substantial overheads and also pay their shareholders.

Non-bank lenders focus only on lending and are funded through wholesale funders or a group of investors who invest in the mortgage for a return. Because non-bank lenders don’t have the same overheads as traditional banks, the wholesale funders or investors can offer competitive rates to their customers.

Uptain - Blog Benefits of non-bank lenders

Benefits of non-bank lenders

Short wait times for application processing

The process of applying for a home loan through a traditional bank can take much longer than with non-bank lenders. This is because traditional banks have much larger operations and time-consuming processes that often rely on face-to-face meetings. With multiple steps and meetings involved, the process can drag on. Because non-bank lenders have much smaller operations and newer technology to help process loans at a faster rate, applications are processed faster.

Utilising modern technology

Being smaller institutions also means non-bank lenders can adapt and adopt new technology faster than traditional banks. It’s much harder for larger traditional banks to make these changes as they have to execute these changes on a much larger scale. Using new technology, non-bank lenders can process your application and manage your approved loan more effectively and efficiently. As a result, you will benefit from also being able to manage your loan in an easier way.

Easier home loans for the self-employed

It’s no lie that qualifying for a home loan through the traditional banking system is a lot harder for self-employed people. Non-bank lenders like Uptain recognise this and are there to help self-employed people purchase their new homes. While the banks will only qualify self-employed people, who have been working for themselves for a minimum of 2 years, non-bank lenders have options in place for those who are ready to buy but haven’t reached that 2-year mark. Read our <How to qualify for a home loan if you are self-employed>, article to find out more.

Disadvantages of non-bank lenders

Non-bank lenders are not a one-stop shop for your financial needs

When you go to a bank, you can have multiple products in the same place because they offer depositing and lending services. So some may find it easier to get their home loan from their bank where they already have their accounts set up. Non-bank lenders only operate as lenders. You cannot have accounts set up where you deposit your earnings and savings. It comes down to what will be a better fit for your individual goals.

Online services may not be for you

Most non-bank lenders operate online and don’t have branches. For some, this works perfectly, while others may rely on having face-to-face interaction with their provider. If you don’t have access to the internet or find it difficult to use a computer and don’t have anyone who can help you, it may be easier for you to purchase your home loan through a bank. With banks you can go into a branch and receive in-person customer service.

Are non-bank lenders safe?

Non-bank lenders in Australia must adhere to strict financial regulations. They must hold an Australian Credit Licence and comply with the Australian Consumer Laws, Privacy Act, National Consumer Credit Protection Laws and ASIC’s regulation.

These regulations are put in place to protect you as the consumer.

If you would like to discuss whether a non-bank lender is the right choice for you, get in touch with one of our lending experts.


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