Why more Aussies are choosing alternative lenders over banks

Why more Aussies are choosing alternative lenders over banks

Need money fast, but the bank's putting up roadblocks? You’re not the only one.

Maybe an unexpected bill landed in your lap. Maybe you’ve hit a slow patch in your business. Or maybe you just don’t have time to wait three weeks for someone in a suit to tell you no. That’s why more Aussies are turning to alternative lenders. They move faster, ask fewer questions, and look at the real story behind your numbers. But with speed comes trade-offs—and not all lenders are created equal.

Here’s what you need to know before you apply.

The Reality of Bank Lending

If you have a strong credit profile and plenty of time to wait, a traditional bank loan could work for you. Banks usually offer:

• Lower interest rates
• Longer repayment terms
• Predictable monthly repayments

But here’s the trade-off:

• The eligibility criteria can be strict
• They run hard credit checks upfront, which can hurt your credit score
• The process can be slow, often taking weeks

This can be a hurdle if you’re self-employed, have an irregular income, or are new to business. It can also make personal finance tricky if your credit score isn’t perfect or your documentation isn’t neatly packaged.

The Flexibility of Non-Bank Lenders

Non-bank lenders are built for speed and flexibility. Whether you're running a business, managing a side hustle, or dealing with a personal expense, alternative lenders can:

• Approve loans in hours, not weeks
• Offer same-day access to funds
• Assess applications based on real-time financials, not just credit scores

They tend to be more open-minded about applicants with short trading histories, seasonal income, or less-than-perfect credit. However, this flexibility often comes with higher interest
rates and shorter repayment terms. That’s the trade-off for fast access and lower entry barriers.

What are the hidden costs?

Before signing on the dotted line, look beyond the interest rate. Ask about:

• Establishment or setup fees
• Monthly account-keeping charges
• Early repayment penalties (or discounts)

These extras can make a big difference.
Tip: speak to a financial adviser to get a better understanding of the things people typically overlook.

How will it affect your credit score?

Here’s something many people don’t realise: every time a lender runs a credit check, it can affect your score—especially if you apply at multiple places within a short time. Banks are
known for running these hard enquiries, which leave a mark on your credit file and can lower your score.
Alternative lenders often use soft checks or assess real-time financial data upfront, which means your credit score usually isn’t impacted (at least, not until you’re further along in the
process).
Tip: Avoid submitting multiple applications “just to see what happens.” Pick one lender that fits your situation and apply with intention.

How will the loan fit into your cash flow?

Think about how repayments will affect your day-to-day finances.

• Will you still have breathing room after each repayment?
• Are the terms too short for the size of the loan?

Tip: Map out your cash flow month by month, including loan repayments, to make sure you can manage it with your circumstances.

Why “faster” isn’t always better

Yes, speed is great. But don’t let a quick approval distract you from reading the fine print. Ask questions like:

• Is the interest compounding? If so, daily or monthly?
• What happens if I miss a repayment?
• Are there exit or admin fees?

Tip: If something doesn’t make sense, ask the lender to explain it in plain English. If they can’t (or won’t) that’s a red flag.

Have you explored government support?

If you’re a first-time borrower, you might be eligible for:

• Government-backed small business loan guarantees
• Personal hardship loans or refinancing assistance

Tip: These can be paired with private lending to reduce your risk or total repayment costs.

Alternative lenders aren’t here to replace banks—they’re here to fill the gaps. For many Australians, especially first-time borrowers, they offer an accessible way to access funds when banks just aren't an option.

Whether you choose the structure of a bank loan or the speed of a non-bank lender, the key is to choose a solution that fits your goals, your timeline, and your reality.

This article is by Bizcap