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Private Lenders

Private Lenders vs Banks – Who To Choose?

Private lenders vs banks
Choosing the right lender to suit your circumstances isn't always a straight forward decision.

Choosing the right lender to suit your borrowing needs isn’t always a straightforward decision. Both come with their pros and cons that depend heavily on your individual circumstances. When it comes to private lenders vs banks, you need to do your research and understand what each one offers before making a decision. Here is everything you need to know when it comes to private lenders vs banks.

Private Lenders vs Banks

What is the difference when it comes to private lenders vs banks?

Private lenders don’t hold a banking license. They are typically referred to as non-bank lenders and are known for being more flexible than banks with their lending terms. They are more likely to offer a loan to those who have been turned down from a bank, and generally consider a borrower’s history.

It’s important to note that contrary to popular belief, private lenders have to abide by the same laws, regulations and rules as banks. This means when you are choosing between private lender vs bank, you are protected in both scenarios.

Banks on the other hand are also known as traditional lenders. They tend to be the go-to for most people and are considered the more reliable of the two. Of course, this isn’t necessarily true, knowing that all lenders are held to the same regulations.

The loan process is generally fairly straight forward, but it does rely on a lot of conditions and doesn’t offer nearly as much flexibility as a private lender. They quite often turn borrowers down based on their credit score and don’t consider their personal situation in the process of application. Their rules are a lot more rigid.

Private Lenders vs Banks: Pros and Cons

When looking at private lenders vs banks, it’s important to consider the pros and cons of each. 

Private lenders

Pros:

  • They offer competitive rates and more convenient loan offers.
  • Often they come with low setup costs.
  • The criteria are more flexible. If you are in a position of bad credit, then a private lender could be the right option for you.
  • They consider your personal needs.
  • Private lenders often provide a better, more personal customer service.

Cons:

  • You need to do your homework: there are a lot of private lenders out there that aren’t trustworthy. You need to shop around and make sure you make the right choice.
  • Private lenders tend to be more vulnerable to changing economic conditions. This can make them a little less stable if a crisis hits.
banks

Banks

Pros:

  • Bank loans often come with a lower interest rate.
  • Banks are much more stable should an economic crisis arise.

Cons

  • They generally have less flexibility when offering a loan.
  • Banks also have stiff regulations and rely heavily on your credit score.

So, which one is better when it comes to private lenders vs banks? Ultimately, it comes down to you and your individual circumstances. It also depends on what type of loan you are taking out. From mortgages through to personal loans.

Taking Out A Loan

The loan process is quite similar between private lenders and banks:

  • All applications made will require supporting documents. 
  • There will be qualification guidelines that you can read ahead of applying.
  • You can enter into a negotiation with the lender.
  • Loan contracts are drawn up.
private lenders

Low Credit Score

One of the main differences between banks and private lenders is the impact your credit score has on whether or not you can take out a loan. A low credit score doesn’t make you a bad borrower. Life is unexpected and bills can crop up all the time, from finding yourself in a car accident to hail damaging your car. There are some things that are simply out of your control.

The difference is, a bank won’t consider these circumstances. They will see a number and make a decision based on this. On the other hand, private lenders have a lot more flexibility. They will consider your individual circumstances and can tailor a loan to suit your needs. This presents a lot more freedom when taking out a loan.

Your Loan

At the end of the day, both banks and private lenders come with their advantages and disadvantages. If you find yourself in a position of bad credit and unable to take out a bank loan, then the flexibility of a private lender could be well worth it. They will look at your individual circumstances and tailor a loan to your needs. It opens up more avenues when it comes to taking out a loan and offers a more personalised experience.

If you are looking to take out a loan, then speak to the experts at the Australian Lending Centre. We are here to find the right loan for you.

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Interest Rates News

When Will Australian Interest Rates Rise Again?

when will australian interest rate rise again
Banks have dropped interest rates, but as Australia’s economy continues to deteriorate. when will Australian interest rates rise again?

The global pandemic COVID-19 has had a drastic impact on all industries. People have found themselves out of work, businesses have been forced to close down and people have been self-isolating from home. Australia’s economy has deteriorated under the impact. To protect the economy, Australian interest rates have dropped to rock bottom, however, this can only continue for so long. In this article, we discuss when will Australian interest rates rise again?

The primary response to the crisis has been focused on public health. While the secondary response has been saving what’s left of the Australian economy. Back in March 2020, the Reserve Bank responded by slashing the interest rates to a record low of 0.25 per cent. As we slowly return to life as normal, we are left wondering when will Australian interest rates rise again?

The Current Climate

With the onset of the global pandemic and the situation changing daily, no one could have predicted the impact this health crisis would have globally. Yet, as soon as social distancing laws were placed in Australia, many businesses were forced to shut down. This lead to an immediate 5.5% slump in jobs. Data suggests that 780,000 people found themselves out of work by the beginning of April. Shockingly, restrictions were only introduced on 30 March. In addition to this, wages were said to be down 6.7% in the three weeks following this.

To combat this, the Government introduced the Job Seeker and Job Keeper packages. This was an effort to keep the economy flowing and as many people in employment as possible. The Reserve Bank of Australia also stepped up by slashing interest rates. They now sit at the lowest ever in Australia’s history.

interest rate increase

How Do low Interest Rates Help?

These interest rate changes have a huge impact on everyday Australians. However, the level of impact depends on whether they hold fixed or variable loans. If they hold a fixed loan, they will see no change. But those with variable loans will be able to save plenty of money with a reduced amount of interest charged on their account. This, in turn, impacts on their consumer behaviour. If they are able to free up more money, they will spend it in the economy. As a result, giving it a much-needed boost. It also lowers the cost of taking out a loan. Those struggling with finances during this crisis can use a loan as a viable option to help them out with the loan interest rates.

Now that restrictions have eased with children returning to school and people returning to work, where does that leave interest rates? When will Australian interest rates rise again?

When Will Australian Interest Rates Rise Again?

The simple answer: nobody knows. What we do know is that it is unlikely we will see a further drop in interest rates. But at the same time, they are also unlikely to rise any time soon. Reserve Bank governor Philip Lowe said the bank would hold the cash rate at 0.25 per cent “until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2-3 per cent target band”. While restrictions have eased, life is yet to return to normal. Unfortunately, it could be a long time before we see the economy make a recovery from the effects of the pandemic.

According to Dr Low, this rate could remain in place for years, as the economy slowly builds its way back up again.

At the moment, there are too many unanswered questions to be able to put in place an accurate prediction. With restrictions beginning to ease, we have to wait and see if we are hit with a second wave of the virus. This would result in stricter measures coming back into play. These are all new waters we are navigating. Sadly, it doesn’t look like we should expect things to change anytime soon.

The good news is, now is the perfect time to get your finances in order as much as possible in your situation. You can use the rate cuts to save your money so it is put away for a rainy day, pay off any existing debt while the interest is low, or even refinance your loans into one new low interest rate. Now is the time to start exploring your options.

rise in interest rates

Need Help?

With the current climate, now is a good take a good hard look at your financial situation. From here, you can see what changes you can make to secure your future. Work out which option is the best for your current situation now. From here, you can put a plan into place while the interest rates remain low for the foreseeable future. If you are looking for a helping hand to navigate these waters, contact the experts at Australian Lending Centre. We can help you get on track with your loans. With our assistance, you can capitalise on the low-interest rates.

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News Personal Loans

The difference between Non-Bank Lenders and Traditional Lenders

banks vs non-bank lenders
banks vs non-bank lenders

Years and years ago, if you needed a loan, you went straight to the bank to assess your available options. These days, non-bank lenders have emerged, offering a legitimate alternative to traditional lenders, and adding a competitive edge to loan marketing.

Depending on your circumstances, it may help you to step away from traditional lenders and hunt for a non-bank lender. But do you know exactly what the difference is between non-bank lenders and traditional lenders?

We will take you through both options and look at exactly how they differ in terms of what they offer to you, so you can judge which one would best meet your current needs.

What Are Non-Bank Lenders?

Essentially, non-bank lenders are exactly what you think. Non-bank lenders are alternative lenders who are not traditional banks. They don’t have a banking license and are not a mutual, ie a bank, a building society or a credit union. Nonbank lenders are called Authorised Deposit Institutions, or ADIs.

Unlike banks, they can’t accept deposits, so they have to source their money from elsewhere. They often take out a loan from the bank at wholesale rates and then lend this money on for a profit.

What are Traditional Lenders?

Traditional lenders refers to banks and other ADIs defined above. They have been the source of loans throughout history, and only recently has this turned around with the proliferation of non-bank lenders entering the market.

They are regulated very differently to non-bank lenders. Banks are largely regulated by the Australia Prudential Regulatory Authority (APRA), while non-bank lenders are regulated by the Australia Securities & Investments Commission (ASIC).

Benefits of Using a Non-bank Lender

While choosing to go with a non-bank lender may not be the obvious choice, there are a number of benefits that come with using one.Lower interest rates: They borrow their funds at wholesale prices, which offers them a larger margin to work with than the banks, and can often mean they have lower interest rates than the banks. They also have limited fees as they don’t have any of the overhead costs that traditional lenders face.

Regulations: being subject to different regulations means non-banks are often a lot more flexible when it comes to lending. This enables them to tailor the process to specifically meet your needs.

Take on high risk

Whether you have a bad credit history you are trying to repair, or a business start-up, non0bank lenders are more likely to take a risk on you than traditional lenders.

Better customer service

As they are smaller than the banks, non-bank lenders often offer a more personalised approach to their customer service, so you will receive more attention to your loan and what you want out of it.

Lower down payment requirements

While banks take about 20% down payment on mortgage loans, non-bank lenders take a lot less, sitting at about 3.5%. For those who have been turned away by the bank, this is a great option to make owning their own home a possibility.

Faster approval process

With fewer hoops to jump through, non-bank lenders have a much faster approval process than traditional lenders, so you have the money in your hands even faster.

Specialists

Often, non-bank lenders can specialise in a particular loan. While traditional lenders offer an array of financial services, by specialising in just one, non-bank lends have a greater insight into that type of loan and can help you out more.

Benefits of Using a Traditional Lender

There are also some benefits that come with using a traditional lender that shouldn’t be overlooked.

Security

One of the biggest, is course, security. The banks are well-established institutions with a degree of trust built into their name. Many people feel safer with this option and sticking to what they know – especially if they already bank with them.

Less vulnerable

As banks are much larger than non-bank lenders, there is a perception that they aren’t as vulnerable to any economic hardship that may come about.

Which One Is Right For Me?

Many people perceive that traditional lenders are the best and safest option, especially when it comes to taking out a big loan, such as a home loan. This just isn’t the case anymore, and by not considering all your options, you are limiting yourself and potentially missing out on the right fit for you.

Loans Based Upon Your Unique Situation

Working out which option is best for you really does come down to your individual circumstances. You need to make a choice based on what you need the money for, what your credit situation currently is, and which service is more compatible with your needs. Shop around and find the best option for you.

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Personal Loans Home Loans News

Mortgage Broker vs. Banks: Which Is Better?

no credit check loans australia||alc mortgage broker vs bank||alc mortgage broker vs bank

The verdict of a mortgage broker vs. banks contest may seem difficult to assess at first glance. Both can help you with good rates on your home loan, but there are some things they do differently. Maybe, after all, you’ll be the one to say who the winner is in the mortgage broker vs. banks competition.

Mortgage Broker vs. Banks – What Does a Broker Do?

A mortgage broker is fundamentally an advisor. This is the person that will investigate whether you are worthy of a loan or not. You guessed it – your credit score matters, but that’s not all. Your income and, subsequently, your ability to pay the loan back will be taken into consideration, as well. If you are eligible, the broker will look for the best offers that suit your needs.

The greatest advantages of using brokers instead of banks are their expertise and the fact that they may not frown at your bad credit. They know a lot of other lenders that can provide you with suitable offers. Because they are not affiliated with any banks, they are sure to find lenders that don’t really care for your stained credit file. They may even be specialised in serving people in predicaments. This particular section in the mortgage broker vs. banks contest is definitely won by the former.

A mild disadvantage when it comes to brokers is their number. There are so many that it may be difficult to choose the best one. Before you call on an agent, make sure that he has been in the business for a long time. Simple research can be very useful. Friends or relatives that previously used brokers to get good deals can also guide you.

What Do Banks Do?

In the same fashion, banks will assess your creditworthiness by having a bank loan officer to manage your files. Banks are often scarier than brokers because of the higher rates and fees. Loan officers have years of experience in banking and finances, in general, so you can rest assured that you’ll get the best rates.

Although banks are not inherently bad, they might prove to be an actual impediment in your way. In contrast with the brokers, banks always look at your credit score. They are not that eager to lend money to people who have a bad credit score.

Another disadvantage is that when you work with a bank, you will be given only the loans that the particular bank is offering. On the other hand, a broker can have access to a wide variety of lenders and loans.

Which One Is Best?

Both have their advantages and disadvantages. If you have bad credit or you want a wider array of options, a mortgage broker is a perfect choice. If you have good credit and the offers of the financial institution would suffice, a bank would do as well.

In other words, the verdict on mortgage broker vs. banks depends on your needs, the cleanliness of your credit and the deal you are trying to get.

If you still have questions, read more about non-bank lenders HERE.

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News

IMF Declares Australian Banks Won’t Collapse Under Subprime

jobs and growth

Fears of Australia’s economy going into recession as a result of the US housing price collapse may be unfounded.

According to the International Monetary Fund (IMF), banks are not in danger of going belly-up, with Australian house prices only “moderately” overvalued.

As the IMF says “The results do not produce evidence of a significant over evaluation of house prices”.

Australians can sigh a breathe of relief over the news that puts our economy in relative safety, given the current global credit crisis.

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Debt Management

Banks Funding Costs Hurt Borrowers

no credit check loans||bad credit loans

There are claims that Australia’s banks funding costs are imposing obstacles on borrowers that prevent them from getting a loan.  A non-bank financial group has suggested that money sourced from global credit markets is now priced

considerably higher than it was a few years ago, which means that banks can be very selective as to who they lend to.

If this is the case then essentially banks are cherry-picking potential customers with the best capacity to repay their debt, and are imposing obstacles to prevent those with a bad credit history from securing a loan.

Being rejected for a loan could adversely affect a borrower’s credit rating, and in turn this could also affect them the next time they go to a financial institution to borrow money.

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Categories
Home Loans

Brokers Beat Banks on Customer Satisfaction

personal loan

Recent research has found that borrowers who use mortgage brokers to source their loan are more satisfied with the service provided and their end loan product than those who source their home loan through the banks.

Continue reading “Brokers Beat Banks on Customer Satisfaction”