I have been reading the latest "The Adviser" a magazine for Australian Mortgage and Finance brokers. In this edition, they discussed the "alternative" lenders currently available to consumers in Australia. The list of alternative lenders or second tier lenders is rather long, AMP Banking, ING, and CitiBank are no means the exhaustive list of second tier lenders.
So are there any differences? These second tier lenders still lend out money to their customers, based upon their lending criteria. They have a variety of loans from Home Loans, Investment Loans, to Line of Credit. These products are the same as the major lenders. So once again, what are the differences?
The above magazine said that since the GFC, the majors are now dominating the home loans market by 90% which leaves the other lenders at 10% market share. But if you are looking for an alternative to traditional banking, perhaps you can consider the other lenders. However here are some things that you may find different.
Transactional Accounts
Not all second tier lenders have transactional accounts that you may be familiar with when comparing with the major banks. However one benefit is that some second tier lenders will offer NO FEE withdraws from other bank's ATM since they do not have ATMs themselves.
Service
Another difference is the level of service you may received from second tier lenders. One lender that comes to mine is based in Queensland. They will ensure that you have the very best experience in your lending. However their lending policy is one of the strictest.
Commissions
As some of these lenders may not have a physical shop front, they will rely on the broker network to write business for them. Some may not even have lending staff, so the entire lending role from interview, collection of information and submission is outsourced to the broker network. Some of these lenders may pay higher commissions, offer their brokers incentive with benefits to consumers. Always with commissions, you should ask your broker what they are being paid to lodge your loan and why they have chosen this lender/product for you.
Cross Selling
Some consumers may like the idea of a one stop shop whereby they are able to get their insurances, loans, credit cards, personal loans and etc from one centralised location. These second tier lenders may not be able to provide all financial services however your broker if accredited, may be able to bridge this gap.
Once again, the above are some differences. To get the best deal, remember to ask questions, research the product or the lender and if you do not understand what your banker or broker is recommending, do not sign the application form.
