Non-Bank Lender vs Private Lender: What Is the Difference?

Key takeaways

• Non-bank: wholesale-funded, long-term, published policy, rates above banks.
• Private: privately funded, short-term, policy per deal, materially dearer.
• Non-banks are a bank alternative; private lenders are a bank bridge.
• The categories blur - compare the actual offer, not the label.

How each one is funded

Funding explains almost every other difference. A non-bank lender raises money on wholesale markets, often through securitisation, in large volumes at a cost above bank deposits but well below private capital. That funding is cheap enough to support thirty-year mortgages, and it comes with investor expectations that push the lender towards a consistent, published credit policy.

A private lender draws on private investor money, a mortgage fund, or its own balance sheet. That capital is more expensive and more patient about structure but less patient about time, which is why private loans are short and dearer, and why policy can be set deal by deal instead of by a rulebook.

So the two are not points on one spectrum of "not a bank". They are different businesses that happen to share the label.

Side by side

The practical differences follow directly from the funding.

Note the assessment row - it is the one that decides where your application should go. If you can evidence income but do not fit bank policy, a non-bank is the natural home. If income is the problem and equity is not, that is private lending.

Which should you approach?

Start with a non-bank if you need a long-term loan, can evidence income in some form, and were declined by a bank on a policy technicality rather than on capacity. You will pay more than a bank but far less than private, and the loan can run for decades.

Go private when time or structure rules the others out: settlement in days, security a bank or non-bank will not take, a second mortgage, or a project mid-build. Treat it as a bridge with a defined exit rather than a destination.

The labels blur at the edges, and some businesses describe themselves as whichever term is more flattering. Ignore the label and compare the actual offer - term, total cost over your holding period, maximum LVR, and what happens if you need an extension.

Our guide to when non-bank lenders beat banks covers that side in more detail.

Frequently asked questions

Is a non-bank lender the same as a private lender?

No. Non-banks are large wholesale-funded institutions offering long-term products with a published policy at rates above banks. Private lenders fund from private capital, lend short-term at materially higher cost, and set policy deal by deal.

Are non-bank lenders regulated?

Non-banks providing consumer credit must hold an Australian Credit Licence and comply with the National Credit Code, though they are not prudentially regulated by APRA as banks are. Business-purpose lending generally sits outside the consumer regime for both categories.

Which is cheaper?

Non-bank lending, by a wide margin, because of the funding cost. Private lending is priced for speed, flexibility and risk the others will not take - which is worth paying for when it secures a transaction, and not otherwise.

Related reading

• Why Private Loan Rates Are Higher Than Bank Rates
• Private Lender vs Broker: Who Are You Actually Dealing With?
• Exit Strategies: How Short-Term Loans Get Repaid

Sources

• Chart pack - lending — Reserve Bank of Australia
• Credit licensing — ASIC