Jargon Buster: What's A Non-Bank?

Two men learning about home loan jargon

What exactly is a non-bank lender? As a proud non-bank lender ourselves, we explore the facts and expose common misconceptions about these institutions who play a vital role in New Zealand's home loan and lending ecosystem.



What is a non-bank lender

What is a non-bank lender?

Put simply, a non-bank lender is a finance provider that isn't a bank. At Pepper Money, unlike banks, we don’t take deposits (money people put in their savings accounts), so where bank loans are mostly funded by those customer deposits our loans are funded by money raised through professional investors. Otherwise – we are not so different. We both offer people home loan options and prioritise responsible lending.
Are non-bank lenders as trustworthy

Are non-bank lenders as trustworthy as a bank?

Absolutely. Non-banks are perfectly trustworthy home loan providers who help drive competition with the mainstream lenders in New Zealand's mortgage market. They offer borrowers an alternative to a traditional bank loan, which not only gives people more choices, but provides an option for those who fall out of the big bank’s risk appetite.

Did you know? Non-banks make up a growing part of the home loan market, lending billions of dollars to fund home loans each year.

Do non-bank lenders only give loans to people with a bad credit history

Do non-bank lenders only give loans to people with a bad credit history?

Not at all! Non-bank lenders are an option for prime borrowers - those who could go to a traditional lender, tick all the boxes and have a squeaky-clean credit score. However, non-bank lenders often specialise in providing loans for so called non-conforming borrowers including self-employed people, first time buyers and property investors.

Some borrowers get knocked back simply because they don’t fit the banks usual boxes, like having a credit history, or meeting their insurance providers’ criteria – e.g. Lenders Mortgage Insurance (LMI), Low Equity Premium (LEP) or Low Equity Margin (LEM).

One example: if you’re self-employed you might not have evidence of cash flow or income statements, so your loan application may be rejected by a traditional bank lender.

But just because an applicant has been turned down for a loan by a bank doesn’t always mean they’re a credit risk. Which is why many non-bank lenders, including here at Pepper Money, take all aspects of your circumstances into consideration and use specific lending criteria when assessing your home loan application.

Are non-bank loans more expensive

Are non-bank loans more expensive?

Many things can affect the interest rate and fees you get offered; including market influences, the nature of the loan you’re looking at and credit assessment requirements.

At Pepper Money, every home loan application is individually assessed based on its own merits, with the assessment carried out by a real person who’ll take the time to understand your individual circumstances and look to provide loan options.

Are non-bank lenders financially secure

Are non-bank lenders financially secure?

Absolutely. Non-bank lenders must fully comply with the same consumer credit rules and regulations as any credit provider like the bank does. Applications will only be approved if they satisfy our loan suitability criteria and credit assessment requirements. Ultimately the borrower must be able to pay back the loan. In fact, Pepper Money is funded by some of Australasia's leading financial institutions - so you can rest assured knowing that we can support your loan with us.
Do non-bank lenders have fewer product options than the banks

Do non-bank lenders have fewer options than the banks?

If anything, non-bank lenders tend to offer a wider range of home loan options. Often non-bank lenders are more flexible in their approach to cater to borrowers who do not fit the traditional lending criteria of the banks.

At Pepper Money, we have home loan options for all types of borrowers; from full-time PAYE customers with a healthy deposit, to those self-employed and small businesses owners working with alternative documentation.

Our approach looks at all aspects of a person’s individual circumstances and credit requirements to help find the right loan for their situation.

Apply for a Pepper Money Home Loan

Want to find out where you stand? Calculate your Borrowing Power.

Work out how much you may be able to borrow with us in just a few simple steps – and it won't impact your credit score.

You are protected by responsible lending laws. Because of these protections, the recommendations given to you about home loans are not regulated financial advice. This means that duties and requirements imposed on people who give financial advice do not apply to these recommendations. This includes a duty to comply with a code of conduct and a requirement to be licensed.

All loan applications are subject to the lender completing responsible lending checks and considering the borrower’s individual circumstances. Terms, conditions, fees and charges apply. Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.

© Pepper New Zealand Limited NZBN 9429031065153 | NZ Company Number 3416551

Get in touch with a Lending Specialist

Tell us about your situation. The more we learn, the better we can help.