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Published February 29, 2024
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How Do Non-Bank Lenders Work?

Non-bank lenders have a credit licence and offer products like loans and credit cards. They can't operate as a bank and accept deposits.

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Banks in Australia still dominate the mortgage market as the leading home loan lenders, but in recent years, more Aussies are turning to non-bank lenders. 

What is a non-bank lender? 

A bank is legally an Authorised Deposit Taking Institution (ADI), which means they can take deposits and offer transaction accounts and other products such as mortgages. A non-bank lender is not a deposit-taking institution but rather a business that can provide credit-based products

Non-bank lenders do not hold banking licences, but they are almost always required to either hold an Australian Credit Licence (ACL) or operate as an authorised representative of a licensee. Some of the same government bodies that regulate banks, such as the Australian Securities and Investments Commission (ASIC) and the National Consumer Credit Protection Act, also oversee non-bank lending.

While non-bank lenders cannot accept customer deposits or offer products like savings accounts and term deposits, they can provide things like credit cards, home loans and personal loans — often with competitive rates, fees and approval times. 

Non-bank lenders in Australia

More than 600 non-bank lenders in Australia, according to the Australian Competition and Consumer Commission (ACCC). Some may operate digitally or entirely online to reduce overhead costs. Some examples include: 

  • Athena
  • Firstmac Australia
  • La Trobe Financial
  • Liberty
  • Pepper Money
  • Resimac
  • Tiimely Home (formerly Tic:Toc)
  • Well Money
  • WLTH.

» MORE: Explore our list of home loan lenders in Australia

Lending process

Non-banks follow a similar process to banks when deciding who they lend to. They consider a variety of factors, including: 

  • Income
  • Expenses
  • Savings/investments
  • Deposit
  • Credit history. 

Like all financial institutions, their decision to give you a home loan or not largely depends on how certain they are that you can afford repayments.

APRA enforces a serviceability buffer of 3% on bank-issued home loans. This buffer means banks must assess whether you can afford a mortgage if interest rates increase by 3 per cent. 

Non-bank lenders do not hold a banking licence from APRA, so they are not required to enforce this buffer. Theoretically, this means they may be able to lend money to riskier borrowers, but they may still choose to implement their own buffer for approval

» MORE: How much can I borrow for a home loan?

Types of home loans and mortgage products offered

Like banks, non-bank lenders provide various mortgage products that target businesses and a range of borrowers. 

» MORE: Types of home loans in Australia

Non-bank vs. bank lenders

Banks still dominate the national mortgage landscape. Data from 2023 indicates the ten largest mortgage lenders in Australia were banks. Together, they comprised a massive 92 per cent share of the market[1].

In contrast, non-bank lending only represents about 5 per cent of Australia’s financial system. However, their presence has grown considerably in recent years. According to the Reserve Bank of Australia, from 2015 to 2023, non-bank mortgage lending grew nearly twice the rate of banks[2]

That upward trend is due, in part, to the relaxed eligibility criteria non-banks use to approve applicants who may get denied by banks — such as self-employed borrowers with low levels of documentation. By providing an alternative form of funding and increasing lending competition, non-bank lending successfully challenges the big banks for business. 

🤓 Nerdy Tip

If you want the best possible home loan, don’t assume your current bank will just offer it out of kindness. Instead, spending time shopping around and comparing different mortgage options and lenders is essential. And it’s always worthwhile to talk to a mortgage broker about your specific needs. 

» MORE: 10 questions to ask your mortgage broker

Advantages of non-bank lenders

  • To compete with bigger banks, non-bank lenders may offer faster processing times, lower fees or competitive interest rates.
  • Non-bank lenders operate on a smaller scale, which can mean more personalised customer service. 
  • A smaller non-bank lender may be more flexible on the terms of a loan to secure your business. 
  • A non-bank lender may have more flexible eligibility criteria as they are not subject to the APRA 3% serviceability buffer. 

Disadvantages of non-bank lenders

  • Non-bank lenders do not hold an ADI licence, meaning they cannot offer the same features as banks, such as offset accounts
  • They may have less variety of products than a bank.
  • Digital or online non-banks may not have any branches in your region, which could be a challenge if you prefer to chat with someone face-to-face.

Frequently asked questions about non-bank lenders

Where do non-bank lenders get their money? 

Non-bank lenders need funds to lend to borrowers, which they can raise in a few different ways. These include market-based finance, securitisation and through investors who provide peer-to-peer funding. 

Article Sources

Works Cited
  1. Statista Research Department, Feb 8, 2024, “Largest mortgage providers Australia 2023, by value of gross lending,” accessed February 29, 2024.
  2. Callum Hudson, Samuel Kurian and Michelle Lewis (Reserve Bank of Australia), “Non-bank Lending in Australia and the Implications for Financial Stability,” accessed February 29, 2024.


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