Contrary to some industry misconceptions, your clients will learn to love non-banks if given the chance
Brokers may be surprised to learn just how willing clients are to be placed with a non-bank lender.
Brisbane firm Tiger Lending, which uses Homeloans, Liberty Financial and La Trobe Financial, doesn’t encounter objections from clients, according to director Melissa Jackson.
That’s because Tiger thoroughly prepares the groundwork before recommending a lender, she says.
Most of Tiger’s clients are first home buyers, while about 30 per cent of Tiger’s volumes go through non-banks.
Ms Jackson says the key is to conduct in-depth discussions with clients to find out what they want to achieve from their loan and what their long-term financial plans are.
“It’s all about solutions for them. None of my business is sold on rates. Rates are the very last thing I compare,” she says.
Ms Jackson gives the example of a recent client who had the option of a no-frills loan at 4.79 per cent but instead chose a 5.29 per cent Homeloans product that was fixed and came with 100 per cent offset.
Value over price
Resicom Financial is an even bigger user of non-banks and directs 95 per cent of its loans to MKM Capital, La Trobe Financial, Pepper, Homeloans and RedZed Lending Solutions.
The main objection Resicom hears from borrowers concerns the higher rates and fees that nonbanks charge, according to chief executive Stephen Mitchell.
“Brokers raise that as an issue, but it’s a matter of selling the benefit for the client over the rate,” he says.
“The borrower needs to have a need for why they’re coming to a non-bank lender. They need to understand that the cost of the opportunity they may lose usually outweighs the cost of the loan.”
Mr Mitchell says clients are receptive to the message because they understand that non-banks are a good shorter term option on the way to a mainstream lender.
'It's all about relationships'
One reason FaradayWest likes non-banks such as Sintex, RedZed Lending Solutions, La Trobe Financial and Pepper is because it knows its clients won’t be pinched, according to director John Paraskevas.
“In our business, it’s all about relationships, and what we find is that the products are just as competitive if not better than the banks,” he says. “We also find that the customer isn’t then railroaded with 20 other products with the bank once you make the introduction. The customer is always yours, and for me that is very important.”
Mr Paraskevas says another reason why he likes nonbanks is because their staff generally have longer tenures, which makes it easier to build relationships and get deals through.
As for FaradayWest’s clients, they are grateful for the choice that the non-bank sector provides, he says.
Mr Paraskevas says nonbanks understand that a onesize-fits-all approach doesn’t suit all borrowers.
“It’s another option, another alternative, and non-bank lenders sometimes look at things from a different angle [than the banks] and appreciate that not everyone ts the box,” he says.
Educate your clients
1800BadCredit.com.au uses MKM, Liberty, Pepper and Latrobe for about 70 per cent of the Adelaide firm's loans.
Director Matthew Watts says some borrowers can be wary of the thought of choosing a lower profile lender over the big banks they have previously used.
Mr Watts says it’s important to educate clients by explaining the background of the non-bank lender and from where their funds are sourced, which is usually abank. They should also be reminded of the advantages non-banks can offer, which include more flexible credit policies and a greater willingness to help the credit-impaired, Mr Watts says.
He adds that borrowers should also be educated about the role non-banks play in the market. “They are very important as at times nonbanks can have better loan rates or have certain facilities available that may not be available through traditional lender types,” he says.
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