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Non Conforming loans are provided by companies outside of standard banking regulation. They are aimed at people who may fall into any of the following categories:

• are credit impaired to different degrees due to loan or other credit defaults
• Self employed people with less than 2 years business tax returns
• People who need to borrow more against an asset than standard Lo-doc or No doc loans will allow
• The security property involved is outside standard lenders guidelines
• Are a recently discharged bankrupt
• For the consolidation of multiple debts (which many standard lenders are not inclined to do)
• For the payment of outstanding tax debts

How does it work?

Non conforming lenders are equivalent to an organised and professional body offering private loans. They are obliged to recommend normal lenders if they believe you would qualify for a loan. In order to be able to offer you funds they must be able to show that there is a material benefit to yourself eg overall lower loan repayments, loan size greater than can be offered by normal bank for the given security.

In all cases property is still required as security, though the definition of acceptable property is generally broader and the level to which they will lend against any given property is generally higher. However the biggest difference is in the interest rate.

In general most non conforming lenders have list of factors that will determine the interest rate being paid. Examples of this being as follows:

• Can you show full income serviceability as per a normal loan or do you need to self certify your income like a Low doc loan.
• If you are credit impaired – what is the size of any defaults and how many are there.
• What is the ratio of the loan to the value of the security (LVR). The higher the LVR the higher the interest rate.

In many cases the interest rate may initially be quite high but most lenders offer a reduction in interest rates over time if you scrupulously make your repayments on time. Usually this is a reduction in rate on the loan anniversary over the first 3 years of the loan.

Features

Most non conforming loans now offer all the features of standard loan.