Lenders

Besides the major banks, there are other types of lenders which can also provide funding solutions when considering a loan.

Banks

There are four very large locally owned banks in Australia that serve a large proportion of the market. Each of the large banks offer the advantage of a well known name, extensive national branch network and comprehensive product range.

Apart from the "big 4" there are a number of other banks in Australia that can be summarised as follows: 

There are four very large locally owned banks in Australia that serve a large proportion of the market. Each of the large banks offer the advantage of a well known name, extensive national branch network and comprehensive product range. Apart from the "big 4" there are a number of other banks in Australia that can be summarised as follows: 
  • Other Australian banks - these banks are locally owned and have tended to be most successful in their original state of origin, but they are increasingly expanding their branch networks into other states.
  • Overseas banks - there are a number of large overseas banks that operate either via local Australian subsidiaries, or as a branch of the overseas parent. Some of these players specialise in loans distributed via brokers, or even directly via the internet.

Building societies and credit unions

Building societies tend to serve a local geographic area, while credit unions serve groups of people who share a common characteristic such as an employer, occupation, or local geographic area. Given that these organisations are not-for profit, they don't have to pass on profits to external shareholders, which means that their interest rates and fees can be quite competitive. 

Retail lenders (via wholesale non-banks)

There is a multitude of smaller lenders who offer their own loans under their own brand, using funds that are sourced from a wholesale non-bank. It's just like goods retailing, where a shop sells a product under its own brand, using a product that is supplied by a third-party wholesaler or manufacturer. The benefit of this arrangement is that the retailer has access to wholesale rates and can pass on the savings to you.

Some people are concerned about getting a loan from a lender that may not be very well known. It's important to remember that wholesale non-bank lenders are regulated by the National Consumer Credit Protection Act and are required to be licensed or registered with ASIC. So provided that the retail lender can offer you the features you require, a competitive interest rate, good service and low fees, they are well worth considering.

It's also worth remembering that it was these lenders who opened up the home loan market in the early 1990s, creating competition that has led to vastly cheaper interest rates for everyone. This form of lending is now a very large, well established and stable part of the Australian home loan market. 

Specialist non-banks

There are a number of lenders available that specialise in offering loans to people who don't fit the normal mould. In particular, non-conforming lenders offer loans to people who may have a blemish on their credit record, or who are looking to purchase a property with unusual characteristics. Another source of lending is via solicitors' funds. In general, these forms of lending are considerably more expensive than standard loans, but they offer the benefit of offering finance to people who may otherwise be ineligible.