What is a “non bank” lender? It’s a funny term, that’s for sure.
In New Zealand we have two types of Lenders. The main banks are the names we are all familiar with – Westpac, BNZ, ANZ, ASB, Co-Operative Bank, Kiwibank, SBS, etc. These banks account for more than 90% of lending in the private sector in NZ.
The ones we are less familiar with are the Non-Bank lenders. Though they are not as commonly used, they do provide some really good options when securing lending through one of the main banks isn’t going to be a goer. Some examples of Non-bank lenders in New Zealand are Bluestone, Avanti, Resimax, Liberty Finance, and many more.
It is easy to understand what the main banks do – basically they provide day to day banking such as transactional accounts and savings accounts, and credit in the form of credit cards and loans.
A Non-Bank generally provides access to loans but not day to day banking services (with some exceptions such as NZCU).
The key difference:
-The main banks get their money from the Reserve Bank of New Zealand (RBNZ), and depositors.
-Non-banks self fund and get money from depositors, they do not get cheap money from the government.
Non-banks can be a great option for securing lending if you have a “credit blip” – a blemish on your credit record (arrears, non payments, any credit issues) and a regular bank is not keen to lend to you.
Their lending criteria is different to that of the main banks, which opens up options for many of us. Sometimes you pay a higher interest rate for the privilege of securing lending when you might have been turned down by one of the main banks. Often that is worth it, when you look at the benefits.
Non-Bank lenders can be good stepping stones in your journey to financial freedom or to get your finances back on track so you can use the main banks. When your circumstances and credit record change you may then choose to transfer your loan to a lower rate with one of the main banks. It’s all about looking at the big picture, and using the tools available to get you where you want to go.
Not all non-banks are equal. Use them with care and with the support of a financial adviser so you understand your risk and your path to the mainstream.