What Are The Advantages Of Non Bank Loans

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Advantages and Disadvantages of Non-bank Loans

Non-bank lending is a large amount. It is possible to look at it in a way that the greater the competition, the more advantageous conditions you can get as a client.

Non-bank loans are much easier than bank loans. It is not so complicated and lengthy to obtain them. Non-bank loans have many advantages, but there are enough fraudsters among their providers. Therefore, using online loan comparison services is much safer when applying for a non-bank loan. Here fraudsters are not mentioned and are proven providers. You can also use calculations and consultations free of charge by a loan specialist to recommend a suitable loan.

Advantages of non-bank loans

The big advantage of non-bank loans is that their negotiation is quick. They can be requested online, by phone or via SMS from home. For an SMS loan, you do not have to have your own bank account and choose a cash loan with a payout. You can also choose the best loan, the first free loan, without interest and fees. You can also have a record in the debtors register and you do not need to have a permanent income at work, as a businessman or tradesman. You don’t need a guarantor or stop the property. You may be in execution and insolvency. You can get money very quickly and have it up to 15 minutes in your account.

Disadvantages of non-bank loans

You can borrow only lower amounts, mostly tens of thousands of crowns. Very fast loans are up to $ 20,000. Fraudulent practices may also be encountered. So choose only trusted companies and use online loan comparison. Non-banking institutions have few branches, some have none. Thanks to this, the services are almost free, but it is necessary to read the contracts and ask about the customer line when you do not understand something and need to explain something. You also have higher interest rates, so these loans are really only for unexpected, one-time expenses, when the loan is indeed inevitable.

The Disadvantages of Non-Bank Loans

What Is the Difference Between Performing & Non-Performing Loans?

Banks emerged as lenders in the United States in the late-1800s and held their prominence through many centuries since, acccording to the Economic History Association. In recent decades, though, with the spread of mortgages, small-business loans and credit cards, many non-bank lenders have stepped in to service customers not eligible for traditional bank loans. While these non-bank lenders make more loans available, not all non-bank loans are as high-quality as bank loans.

Less Regulation

Non-bank lenders are able to escape much of the federal and state regulation imposed on bank. After the credit market crash of 2007, the federal government passed new lending standards and regulations limiting the exposure banks could assume in making loans. These regulations did not apply to all lenders, and many non-bank lenders were able to escape oversight. This is not to say non-bank lenders are unregulated; in fact, a whole series of regulations at both the federal and state level apply to any lending activity. However, there is not regulation regarding the amount of equity a non-bank lender can release in the form of loans. There is also less oversight to assure that a non-bank lender does not have a conflict of interest in a loan contract, according to BNET.

Lower Lending Standards

In part because non-bank lenders do not have to meet federal and state requirements imposed on banks, non-bank lenders can set lower lending standards for borrowers. This is the reason many borrowers go to non-bank lenders in the first place. They may have lower credit requirements, and most require less paperwork in making a loan. This means the loans are easier to attain, but it also means the lender is engaging in riskier lending. This places the lender at a higher risk of bankruptcy, which could force your loan into a sale, and it also means the lender will have to compensate for losses through more expensive loan options.

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The pros and cons of non-bank and bank lenders

If you’re considering buying a property and taking out a home loan, it’s time to consider whether you want to go with a bank or a non-bank lender. Both have their pros and cons, it’s simply a matter of personal preference. Read through the considerations below to help make your decision.

When you’re buying a property and taking out a home loan for the very first time, choosing a mortgage product and a lender can be a very overwhelming prospect. There are many lenders out there and working out which one is right for you can be a challenging task. Not only does your lender have to be able to offer you a reasonable loan amount, but also agreeable interest rates, suitable loan terms, low fees and some flexibility, too. You need to be absolutely certain that they’re trustworthy and offering you the very best deal possible.

Healthy competition between banks and non-bank lenders means they’re all striving to offer the very best deals so that they can secure your business. This competition also helps drive loan innovation and opens up opportunities for lenders to specialise in niche products, which may come in handy if you’re a unique customer (e.g. self-employed) or are taking out a loan for a unique property purchase (e.g. construction loan).

The banks and non-banks both have their pros and cons, which means the decision ultimately comes down to your personal circumstances. We’ve outlined some thinking points below, but we suggest you gain expert advice from a mortgage broker or finance professional before making your final choice.

Banks

  • The major banks still hold a majority of market share in Australia, which reflects their continued popularity with borrowers. The Big Four banks are household names and many borrowers — particularly first-time property buyers — may feel safer taking out a loan with established institutions.
  • Many carry out their day to day banking through the major banks, so for simplicity’s sake they may choose to take out a home loan through the same institution. (However, it’s advised that borrowers investigate all options, as other lenders may offer better deals.)
  • While both banks and non-banks are regulated by the Australian Securities and Investments Commission (ASIC), banks also have an extra level of regulation under the Australian Prudential Regulatory Authority (APRA).
  • While borrowers may feel safer taking out a home loan with a major bank as they may believe they’re more capable of withstanding a hit, such large financial institutions can also have their drawbacks. For example, some customers argue that service can be slower and applications can take longer to be processed when dealing with a larger banking institution. Larger institutions may also mean that bank staff have less flexibility and authority to make decisions based on an individual borrower’s circumstances.
  • The major banks have tightened their lending criteria as a result of tougher economic times. Many loan products now require a larger deposit from borrowers to secure a loan, and it may also be tougher for some borrowers to gain loan approval. Many borrowers who may have successfully secured a loan in more optimistic times — such as self-employed workers or those with a poor credit history — may now find themselves being refused.

Non-bank lenders

  • The introduction of non-bank lenders into the home loan landscape has been a great boon for property buyers. Not only have they helped drive competition and innovation, but many also offer a great range of niche loan products, which may cater to your unique purchase or circumstance.
  • Borrowers considered higher risk, such as the self-employed and those with a poor credit history, may be able to take advantage of non-bank lenders’ perceived flexibility and willingness to cater to individual circumstances.
  • Some supporters say that the smaller size of non-banks means they can give more personalised customer service and offer quicker turnarounds on loan applications.
  • While being smaller can mean non-banks are often super efficient, it can also have its disadvantages. It may mean that they’re more vulnerable to unstable economic conditions — as evidenced during the GFC when a number of non-banks withdrew from the market.
  • Some have suggested that non-bank lenders may be more likely to pass rate rises on to their borrowers, as a by-product of their smaller size and greater vulnerability.

Whether you choose a bank or a non-bank lender, there’s no right or wrong answer — take the time to chat with staff and thoroughly research the loan products on offer to ensure that you’re making the best decision for you.

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