May 31, 2020
There are well over 100 lending institutions in Australia. These comprise traditional banks, foreign subsidiary banks, credit unions and niche lenders.
Traditionally, banks were the first port of call for Australians looking for finance, but that’s no longer the case.
OnlineLoans delves into the benefits of using financing companies:
Key Takeaways:
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Non-traditional niche lenders service different lends to big banks
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Finance companies have access to both non-traditional lenders and big banks
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‘Rate shopping’ by submitting formal applications can reduce your credit score
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Finance companies offer significantly faster processing times
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Non-traditional lenders can cater to more complex lending situations
How Do Non-Traditional Lenders Compete With the Big Banks?
Niche or non-traditional lenders are well established in Australia. They offer finance options including car loans that larger organisations won’t.
For example, loans to applicants with bad credit, loans for older vehicles or personal loans for things the big banks might not deal with. Moving expenses or car repairs for example.
In other words, borrowers who don’t meet traditional banks’ requirements, often meet non-traditional lenders’ requirements. This may be ownership of assets, full-time employment or a high credit score.
Non-traditional lenders do not offer as many financial products and services as larger banks and often operate with fewer overheads. Additionally, they can often service complex lending situations with less red tape than big banks.
Matching a Lender to Your Circumstances
Formally enquiring with multiple lenders to shop for the best rate will negatively impact a credit score. Each time an applicant applies to a lender for credit, the enquiry is recorded on their credit report, knocking the score down. Frequent enquiries over a short period of time are the most damaging.
Using OnlineLoans, you can avoid these enquiries. A quick quote will display lenders with proposed rates matched to your circumstances allowing you to shop around without making credit enquiries.
The Application Process
With financing companies, especially those that adopt modern fintech, processing times are much quicker. Applicants submit basic personal information along with key financial data.
One of the benefits of borrowing from finance companies is that the application process can take as little as 15 minutes to complete.
Access to funds
An additional benefit offered by finance companies is the amount of time it takes to access funds. Often, banks take up to 1-2 weeks – some up to 30 business days – to approve applications, especially the more complex lending situations.
This often results in a car buyer finding a seller offering a well-maintained vehicle, only to miss out on the sale due to slow finance processes.
If your application is successful with a financing company, you could see the funds available in your bank account within 24 hours.
Flexible lending criteria
Lending situations can ratchet up in complexity. Often, it comes down to the capacity to repay a loan.
Some examples of complex income situations that lenders need to consider and verify:
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Border or tenant: If the applicant is receiving additional income, is there documentation proving it will continue in the future?
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De facto partner or parental support: If a partner or family member is assisting with an applicant’s living expenses, will it continue in the future?
Finance companies can assess and support complex situations more so than banks. Applicants with bad credit or low credit scores who have been rejected previously, often have more luck with financing companies.
Use funds the way you want to
Finance companies can offer borrowers more freedom as they don’t need to specify exactly where the funds are going. This is in contrast to many banks and bigger institutions who often only approve a loan following detailed information.
If you aren’t entirely sure how you’ll spend the money, this is another benefit of borrowing from finance companies. For example, a car loan without knowing the specific vehicle model variant or a personal loan for home renovations without knowing exact construction details.
Making your choice
Finding the right finance company for you is key to enjoying the benefits of borrowing. Consider your personal circumstances and factors such as improving your credit history and your individual financial situation. To check your credit history, contact a credit reporting agency like Equifax. Note that simply viewing your credit report will not affect your credit score.
Give OnlineLoans a call 1300 927 591 if you have any concerns or questions or apply now to get the ball rolling.