Posted on: 20th Jan, 2013 01:20am
Non bank lenders are those lenders who do not possess the banking license. In other words, unlike the banks, these financial entities are not empowered to mobilize deposits and then channelize those deposits for financing purposes.
In order to obtain the status of a bank, lending institutions have to fulfill certain stringent criteria also. These criteria relate to
For deposits in the bank, the customers are paid interest and on the other hand for the loans given by the bank, customers have to pay interest to the banks. The rate of interest on loan is more than the rate of interest on deposit.
On the contrary, basic features of non bank lenders are
The non bank lending institutions that operate in your community are called the local non bank lenders. Anyways, there are certain advantages of the loans offered by these non banking financial entities. The advantages and disadvantages are listed below.
In order to obtain the status of a bank, lending institutions have to fulfill certain stringent criteria also. These criteria relate to
- Capital requirements
- Reserve requirements
For deposits in the bank, the customers are paid interest and on the other hand for the loans given by the bank, customers have to pay interest to the banks. The rate of interest on loan is more than the rate of interest on deposit.
On the contrary, basic features of non bank lenders are
- No depository accounts for the customers
- Loans offered from own sources
The non bank lending institutions that operate in your community are called the local non bank lenders. Anyways, there are certain advantages of the loans offered by these non banking financial entities. The advantages and disadvantages are listed below.
Advantages
- Wide ranging offers are available for you.
- Rate on this loan may be relatively lower.
- Loan processing is sometimes faster.
- Sometimes, local non bank lending institution may offer loan which may not be approved by a bank.
Disadvantages
- The source of funds of a non bank lender may be cut in future. This may increase the rate of interest.
- Chances of getting caught by an unethical lender are more.
Non bank lending institutions are playing important role in the mortgage industry. These are bridging the gap between demand and supply of home loans in the country.
Recently, I heard this term, local non bank lender. Can anyone explain what it is?
Hi Valariee,
Well, a bank lender is a mortgage professional who is attached to a particular bank like Wells Fargo or Bank of America. A non-bank lender, on the other hand, is just about anybody else in the market offering loans. Most importantly, they are not attached to any particular bank.
Thanks,
Jerry
Well, a bank lender is a mortgage professional who is attached to a particular bank like Wells Fargo or Bank of America. A non-bank lender, on the other hand, is just about anybody else in the market offering loans. Most importantly, they are not attached to any particular bank.
Thanks,
Jerry
The name itself suggests that it's someone offering you loans, but he or she isn't attached with any bank.
Non bank lenders are lenders who do not hold a banking license and who are not a mutual i.e. they are not a bank, a building society or a credit union. A true non bank lender is one who sources their own wholesale funding and then lends out their funds making a margin on the difference.
Banking business is not only about lending. But, it is more of mobilizing untapped savings into productive uses. This ways it bridges the gap between demand and supply of funds. Not all the financial institutions are enpowered to do banking business. On the other hand, a non bank local lender operates locally and is not enpowered to mobilize deposits and channelize those deposits for lending purposes. It lends its own money.