What are non-conforming loans?
A non-conforming loan or non-bank loan is a loan offered to borrowers who don't meet the standard criteria required by banks and most other lenders. This could be because you have a bad credit history, you're self-employed, you've declared bankruptcy in the past or other reasons that might not qualify you for conventional mortgages and loans.
Non-bank loan products themselves are much the same as standard loans, but fees, loan limits and interest rates may vary. A non-bank loan can be either secured (such as a home loan) or unsecured (such as a personal loan).
What are the benefits of a non-bank / non-conforming loan?
The main advantage of applying for a loan with a non- bank lender is that there's more chance you'll be accepted than with a big bank or traditional lender. Depending on your circumstances, such loans can sometimes be the best option or the only option for obtaining credit.
Banks typically have a number of criteria that applicants need to meet before they can be offered a loan or credit card, including having a good credit history and being able to provide evidence of employment. If you're currently unemployed, self-employed, approaching retirement or you've accumulated bad credit, these can be automatic rejections for conventional loan products. However, you may still be eligible for a non-conforming/non- bank loan.
What are the downsides?
By accepting loan applicants who may have a higher level of risk, non-conforming / non- bank lenders often charge a higher interest rate and higher fees compared to a traditional loan. This is to cover the higher possibility of losses if a borrower defaults on their loan. We'll help you to find the most affordable loan available that meets your needs.
While there's more chance of being accepted for a non-conforming / non- bank loan than a conventional loan, not all applications will be successful. Lenders will assess your personal circumstances and may decide that your perceived risk is too high. If this happens, Debt Fix can discuss other options to help you get the solution you need.
Who is a non-conforming / non-bank loan suitable for?
Unlike conventional mortgages and loans which often have strict approval requirements, the eligibility for non-conforming loans could be much more holistic, as long as you are at least 18 years old, an Australian citizen or permanent resident and able to demonstrate that you can service the loan.
Non-bank lenders may take a different approach to banks when assessing your suitability for finance and you may be a candidate even if you may have bad credit score.
While you may stand a higher chance of being approved if you have a good credit history, you may still be eligible if you have records of late or missed payments, defaults or credit impairments. Each case is assessed on its merits.