Bank vs Non-Bank Lenders

When you're looking at purchasing property, whether a home to live in or another investment, did you know that banks are not your only option when it comes to securing finance?

Your situation is individual to you! That's why we may suggest you use a bank (first tier), or a non-bank (second tier) lender.  

So, what’s the difference between these two lender types?

Banks (first tier) - can be seen as a more reliable and safe option for finance. 

Banks are larger, provide their clients with good interest rates, simple application processes and great customer service. They are subject to the Reserve Bank regulations, so have strict rules and lending conditions, and can offer very little flexibility for any variance from these.

Non-bank (second tier) - are institutions other than a bank, credit union or building society.  

They are generally privately owned and offer loan products that often have more flexibility in the rates and fees compared with banks. They do not hold a banking licence but are regulated by consumer credit governing bodies.  They can help home buyers secure a mortgage in situations when they have not met the banks lending criteria i.e have bad credit, not enough of a deposit, or for those who are self-employed and cannot prove their income as the banks require them to.

And, what are the Pros and Cons of both?

Bank Pros:

  • Customers may feel safer with banks as they are more well known and established, larger, and may already be handling their everyday banking needs.  There is a certain amount of trust that the customer already has for the services that a bank provides.  

Bank Cons:

  • There are strict lending criteria that a bank must follow in line with the Reserve Bank rules.  This means there is less flexibility for the customer and perhaps the feeling of “jumping through hoops” to achieve the customer’s desired outcome.  
  • Banks can also seem less personal, being so large with many hundred customers and staff.  You may feel like just another number.  

Non-bank lender Pros:

  • These companies provide customers with competitive rates, and provide solutions for customers who cannot meet any bank's lending criteria rules.

Non-bank lender Cons:

  • Being smaller than banks, they can be more vulnerable to fluctuating economic conditions, and will have higher interest rates than banks.  

At Simpler, we look at your individual situation, compare all rates and fees, and help you decide on the best solution to fit your needs. Ultimately, choosing whether your best outcome is with a bank or a non-bank.

Get in touch with us today and we can discuss the best option to suit you goals. 

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