Major Banks vs Non-Banks: Which Lender Is Right for You?

The short answer

There’s no single best type of lender. Major banks, smaller banks and non-banks each have strengths, and each can be the right fit depending on your income, your situation and what you need from your loan.

The key is matching you to the lender whose rate, policy and borrowing capacity suit you best, rather than defaulting to the name you know.

The lender landscape

Lender type	Who they are	Key traits
Major banks	The big four: CBA, Westpac, NAB and ANZ	Full banking, branches, strong features
Second-tier and regional banks	Smaller banks, often digital or state-based	Sometimes sharper rates and faster turnaround
Customer-owned banks	Mutual banks and credit unions, owned by their members	Community focus, sometimes competitive rates
Non-bank lenders	Lenders that don’t take deposits	Flexible policy for complex situations

How they’re regulated, and is a non-bank safe?

• Banks: take deposits and are regulated by APRA, which sets rules like the 3% serviceability buffer.
• Non-banks: don’t take deposits, and fund their loans in other ways. They aren’t bound by APRA’s lending rules, but they must follow the same responsible lending laws, overseen by ASIC.

Is a non-bank safe? Your home loan is your debt, whoever the lender is. Your repayments, rate and terms are set out in your loan contract. And because non-banks don’t hold your savings, there’s no deposit at risk.

Major banks

• Everything in one place: transaction accounts, credit cards, offsets and packages, with branch and app support.
• Brand comfort: many borrowers simply feel more secure with a household name.
• Still competitive: don’t rule them out. Major banks sometimes still offer competitive rates, strong borrowing capacity and flexible policy, especially for straightforward borrowers.

Second-tier and customer-owned banks

• Sometimes sharper rates: smaller banks compete hard for good borrowers.
• Sometimes faster turnaround: less red tape can mean quicker approvals.
• Sometimes more flexible policy: for example, on certain income types or property types.

They’re still banks, regulated by APRA, so you get the same deposit protections as with a major bank.

Non-bank lenders

• Flexible policy: non-banks can help where banks may not, such as self-employed borrowers, low-doc loans, complex or foreign income, or past credit issues.
• Sometimes more borrowing power: some use a 2% serviceability buffer instead of 3%.
• Rates vary: specialist loans usually carry higher rates, but non-bank loans for straightforward borrowers can sometimes compete with the banks.
• Rates can move independently: because non-banks fund their loans differently, their rates don’t always follow the Reserve Bank.
• Fewer extras: features like offset accounts and packages can be more limited.

A non-bank can be a stepping stone

A non-bank loan doesn’t have to be forever. It can get you into the market now, then you can refinance to a bank once your situation improves.

Example: Marco has run his business for 14 months, so most banks won’t assess him yet. A non-bank lender approves him using his BAS statements. Once he has two years of tax returns, he refinances to a bank at a sharper rate.

Using more than one lender

For complex, multi-step scenarios, the best result sometimes comes from using different lenders for different parts of the plan:

• A competitive rate: refinance your existing loan to a lender offering a sharp rate.
• Maximum equity release: release equity for your next deposit from the lender that will lend the most against your property.
• Maximum borrowing capacity: take your next loan with the lender that offers the most borrowing power.

Example: Ben and Lucy want to buy an investment property. They refinance their home loan to one lender for a competitive rate and the maximum equity release for their deposit. They then take the investment loan with another lender that offers more borrowing capacity.

The order of each step matters, because each one affects the next. We’re experts in structuring multi-lender strategies and can guide you through every step.

Myth: “Stick with your own bank”

Many people go straight to the bank they’ve used for years, expecting loyalty to be rewarded. In reality, your everyday bank may not offer the best rate, the most borrowing power, or the right policy for your situation.

You can keep your everyday banking where it is and still get your home loan elsewhere.

Swipe right?

Choosing a lender is a bit like a dating app. The most popular profile isn’t always your best match, and the right one for you might be a name you’ve never heard of.

We know all the profiles, so you don’t have to keep swiping. With access to over 40 lenders, from major banks to non-banks, our team of lending specialists cuts through the jargon and complexity so you can focus on the most important part: living your life.

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General information only. This article does not consider your objectives, financial situation or needs and is not credit, financial or tax advice. Lender policies and rates vary and change regularly. Examples are illustrative. Seek advice from a licensed credit adviser before acting. Insight Property Finance.