Non-bank lenders offer alternatives to the traditional bank lending, but they can offer similar (and sometimes better) terms on loans as banks.
What’s the major difference?
Flexibility.
Non-bank lenders, especially online, ‘FinTech’ lenders, tend to think creatively, take more risks and consider each borrower’s situation on their own merits.
Examples of non-bank lenders
Here are the various types of non-bank lenders that offer home mortgages – and what you need to know about each one.
Credit unions
On this list, the credit union is most similar to a bank. Both offer financial products like checking accounts, savings accounts, credit cards and loans.In addition to being non-profit, credit unions differ from traditional banks in that they are cooperative. This means that they are owned and operated by members, while traditional banks are owned by stockholders. When you make a deposit in a credit union, you become a part owner.
What you should know about credit union mortgages.
On the plus side, you will usually enjoy lower rates with more flexibility. On the downside, you’ll have fewer loan options and won’t have as many physical locations to step into if you need to talk to someone about your loan.
Building societies
Much like a credit union, a building society is owned by its members. They are also qualified to take deposits.So you’re probably wondering… what’s the difference between the two?It’s actually very simple. The building society operates very much like a credit union, but the building society primarily focuses on mortgage products while the credit union has a broader focus.
What you should know about building society mortgages.
The pros and cons of getting a building society mortgage or a credit union mortgage are similar. The differences are that you may have more loan options with a building society because they focus on mortgages.
Fintech lenders
In addition to credit unions and building societies, there are other non-bank lenders you can turn to. These online or ‘FinTech’ businesses operate for profit, much like banks do, but they don’t accept deposits. They don’t tend to have physical locations, so your contact with them will be online or over the phone.They specialise in loans (and some even specialise in loans to specific types of customers, like those with poor credit ratings) so they are more likely to consider your application even if the banks won’t. After all, their entire business depends on it!
What you should know about FinTech lender mortgages.
FinTech lenders typically offer competitive rates and terms – but as they’re willing to take risks the banks won’t, you can expect to pay a little more for your loan. They are likely to process your application more quickly than a bank might, and the application process may be easier as it’s all done online.
