Risks of non-bank lending
Borrowing from non bank lenders can be risky and one should take into account its risks before considering the option.
Temptations to desperate borrowers
Can’t get refinance from your regular bank? Tempted by Non-bank lenders dangling a 🥕
Here are a few warning signs when considering them.
- Non bank lenders do not subscribe to the Banking code of Practice and are not regulated by APRA.
- While regulated by NCCP and ASIC, accessibility to mediation and negotiation will be limited
- They require lower reporting and lending standards which makes them prone to more irresponsible lending especially lending riskier loans with a high LVR
- Interests rates are higher and they can be more expensive because they have to compensate for the fact that they are taking a greater risk lending where banks refuse to do so
- The loans are usually shorter term which puts you the borrower under even greater stress in repaying larger amounts within a shorter period of time. This can be highly unsustainable.
- APRAs recent increase in its loan serviceability buffer requirement for banks, means more and more riskier loans could be falling to non-bank lenders.
Therefore, think twice before jumping into bed with a non-bank lender as it may often be a case of digging yourself into a bigger and bigger hole to plug a short-term problem.
The easiest and quickest finance could do more damage in the long run.
GBAC has good ways of getting major banks interested in your loan.
There are almost always good solutions to your finance needs.
To find out who subscribes to the code of banking practice click here