With so many different financial terms to keep track of, it’s not always easy to understand the different roles and moving parts of the financial industry. What is a finance broker, and what do these individuals do?
While a mortgage broker specializes in home loans, a finance broker specializes in a variety of different loans. How exactly does this translate to helping consumers of all backgrounds? When might you need the help of a finance broker?
In this guide, we’ll break down exactly what a financial broker does and when you might need one. If you’re in the market for a loan of any type, odds are you’re looking for the best rate and terms to match your needs. A finance broker might be the key to finding what you’re looking for.
What Is a Finance Broker?
A finance broker, as described above, is someone who is well-versed in a variety of financing options. Whether you’re looking for a car loan, business loan, consolidation loan, or a home loan, they’re job is to help you get the best deal.
How do they help? Finance brokers work with banks, credit unions, and other financial institutions to work in both the lender and the client’s best interests. They understand that both sides are trying to reach a good deal, and they’re a mediator who works to do just that.
Why Use a Finance Broker?
Why might you use a finance broker? While not required to apply for a loan, it’s no secret that the loan process is complicated. You’ve got to worry about your credit history, creditworthiness, debt-to-income ratio, and so on. With so many moving parts, having a skilled expert in your corner streamlines this process.
What are the pros of using a broker?
- Expertise: One of the biggest pros is having an expert there to help every step of the way. A skilled broker will explain different aspects of the application to make sure you understand each step of the process.
- Good fit: A broker also can assist you in finding the best fit loan for your needs. If you’re not certain what loan is best for you or how to begin, it’s their job to explain different lending products.
- Supporting documents: Loan applications require a lot of supporting documents like income proof, employment history, and so on. Knowing what to provide is a tricky process, and a finance broker will help you find the right support for your situation.
- Negotiation: The broker’s job doesn’t end once your application has been submitted. They also work with the lender to follow up with your application until you receive your approval. This might involve some level of negotiation.
- Rates and fees: Last but not least, a broker is working in your best interest. Getting you a better deal means they get a completed transition, resulting in more income for them. They can help you secure a better rate, deal, or terms depending on your situation.
While not everyone will need a finance broker, they’re an excellent tool. If you’re unsure how to start the loan process or what options are best for you, using a broker is in your best interest.
How Do Brokers Get Paid?
Now let’s answer one of the most frequently asked questions: how do finance brokers get paid? There’s a lot of confusion about this process, and it’s usually assumed that the client has to pay the broker some kind of fee.
In reality, the client doesn’t usually pay anything to the broker. Instead, the lender pays a commission to the finance broker after the transaction is complete.
While different providers pay varying levels and commissions, this is something brokers will disclose when you use their services There should be no confusion about how your broker earns money, and there’s no incentive for them to “trick” you into the wrong deal.
How Do You Find a Finance Broker?
If you decide a finance broker is right for you, you’ll want to do your research. Different brokers are skilled in different areas, so you’ll want to check the following:
- Qualifications: Like when hiring anyone, is the broker qualified? All finance brokers in Australia are required to operate under a license.
- Membership: In Australia, it’s also common for brokers to be a member of an industry accreditation body like the Finance Brokers Association of Australia (FBAA).
- Lender panels: Lastly, brokers have access to different panels of lenders. Because there’s such a wide range of products and services out there, make sure your broker has relevant lenders on their panel.
When in doubt, ask around and make sure you’re choosing someone trustworthy. Your credit and financial future are on the line, so don’t make this decision lightly.
Find the Best Lending Deal
Finding the right loan for your needs is easier said than done. Since you likely don’t have a lot of experience searching and applying for loans, using a finance broker can be a great way to make sure you’re going down the right financial path.
Debt Busters is always here if you need personalized, skilled advice about what financial steps to take next. With over a decade of experience working with lenders and clients alike, contact our team for a consultation today.