Non-bank lenders charge more than banks. The premium is real, measurable, and in many cases rational. Understanding when the premium is worth paying — and when it is not — is the most important decision in non-bank lending.
Non-bank lenders are priced at a premium to major bank rates. This is structural, not arbitrary. Non-bank lenders fund their loan books primarily through warehouse facilities and securitisation rather than retail deposit bases, and their cost of funds is higher than a major bank's. They also carry higher credit risk in their book — by design — which is priced into their rates. The question for any borrower is not whether a premium exists, but whether it is worth paying.
Current indicative premium ranges
- Prime full-doc (clean credit, strong income, LVR under 70%): 30–70bps above comparable bank product
- Near-prime full-doc (minor credit events, or DTI above cap): 70–120bps
- Alt-doc (accountant-declared income, ABN 12+ months): 50–100bps above full-doc equivalent
- Specialist/adverse (significant credit history, recent defaults): 150–300bps
- Low-doc commercial: 100–200bps
Note: these are indicative premiums as of early 2026 and vary across lenders, LVR bands, and loan sizes. Best-execution pricing requires a lender-specific assessment.
When the premium is worth paying
The premium is clearly worth paying when the alternative is no loan at all. A bank decline is binary — you get zero. A non-bank lender at 60bps above the bank rate delivers the capital you need. The net present value of that capital — for a property acquisition, a business purchase, or a portfolio refinance — is almost always significantly higher than the cost of the rate premium over the loan term.
The premium may not be worth paying when you qualify for bank lending but are considering non-bank for speed alone. Auction finance and pre-approval timelines have improved significantly at some banks, and a minor convenience benefit does not justify a material ongoing rate premium. Each situation is different.
The refinance pathway
Most non-bank borrowers should have a defined exit plan. This typically means identifying the conditions under which a bank lender would approve the same loan — reduced DTI through a property sale, two years of lodged tax returns normalising income, an adverse event falling outside the 5-year assessment window, or LVR improvement through capital growth — and then refinancing at that point. Non-bank lending is a vehicle, not a destination for most borrowers.
The decision to use a non-bank lender is not a compromise. It is a structurally rational choice given the regulatory constraints that make bank approval impossible for a specific borrower at a specific point in time.
This article is published for general informational purposes. It does not constitute financial or credit advice. Eligibility for non-bank lending depends on individual circumstances. Speak with a qualified credit specialist for advice specific to your situation.
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