Are all Lenders the Same & How a Broker can help You Find the Right One
Are all Lenders the same ??
The answer to this question is a resounding NO.
Not only within the traditional banking sector, but even between the big four themselves, there are differences of approach. These differences can be subtle but some are not so subtle.
One obvious example may be a particular bank’s expertise with a certain type of industry or occupation. This is particularly the case with commercial or business funding.
Banks who have greater experience in dealing with a particular industry or occupation, will usually take advantage of that by setting up teams of bankers who specialise on offering tailor made solutions to that particular industry or occupation. This is done to encourage even more business to come to them. Just some examples of industry or occupation specialisations are:
-Medicos and associated industries
-emergency services employees
-education sector employees
-professional services (accountants, lawyers etc)
Even aside from specific industries or occupations, some banks are much better in general at working with those who are self-employed than others are. These will often be the more traditional banks who also have had long standing business banking operations as part of their stable.
Other lenders will have a more basic, no-frills approach and offering whose target market are PAYG workers.
Other differences of approach can be driven by a lender’s exposure or market share to a certain type of borrower, ie:
– industry or occupation
-the type of lending (eg: home loans vs investment loans)
-even lending location.
Should a lender’s market share to a certain type of borrower get too high for their liking, the lender may then limit the amount of new approvals to that borrower type by way of tightening the conditions that that particular type of borrower may need to meet.
On the flip side if a lender’s market share or exposure is less than they desire they’ve actually been known to come out and be more aggressive in chasing that business. This may be by way of lower interest rates or even lessening the number of conditions that applicants need to meet.
The biggest difference is we’ve seen however, particularly over the last decade or so, has been through the emergence of “niche lenders” who target the borrowers that the larger lenders tend to avoid.
These niches may include lending money to people with debts to the tax office which is usually a huge no no with the major lenders. But it can also include lending money to people with past credit issues or defaults.
With so many lenders to choose from this is why it’s critical that you choose the right lender for your own particular circumstances. This will not only make your own experience better but it’ll help ensure that the solutions provided to you are the most appropriate and in your best interests.
How Will a Broker Help me find the Right One ??
Whilst we’ve touched on just a few of the differences of approach between lenders, how does the average person then go about choosing the right lender for them ??
The answer here is via an accredited finance or mortgage broker, and below I will go through just some of the benefits of engaging a broker.
The range of choice now available in the mortgage and finance market is quite extensive and for prospective borrowers can be quite overwhelming. Yes you can choose to research this yourself, or you can work with a finance broker who in many cases already has much of the knowledge already required to make a recommendation to you.
Finance Brokers will have a panel of lenders from which they recommend a loan, for example here at Accountplan Finance Solutions we have a panel of over 35 lenders to choose from.
Brokers are not only required to be accredited with their lender panel but in order to offer their products we’re also required to keep up to date with the terms and conditions and each lender’s latest offers.
Of even more comfort to the borrower is the fact that it is law that brokers must act in the borrowers best interest, every time, very few industries at all must follow such strict legislation.
That said the best deal is not necessarily the cheapest rate. A good finance broker will always examine your circumstances and your future plans to recommend the loan that is the best fit for you. It may be that it is better to pay a slightly higher rate in order to have the services of a bank (or banker) who is better equipped to work with you and your circumstances – this refers back to some of the lender specialisations I detailed earlier.
Having not only an appropriate loan which works for you, but a quality banker / customer relationship can not only better help build wealth and security in the long term, but reduce the risk of having to refinance again due to being unhappy with your bank or lender.
Most Finance Brokers will not charge you a fee for the services they provide because the lenders generally pay the broker a commission when the loan is placed on their book.
Most banks will offer the same if not lower rate through a broker than what you would generally be able to source on your own. This is because of the volume of lending that is put through via the broker Channel – recently the broker channel burst through the 70% mark leaving only 30% of borrowers going direct to the bank themselves.
Another reason is borrower satisfaction. Did you know that of all the complaints made to Australian Financial Complaints Authority (AFCA), less than 1% relate to the broker channel with the rest attributed to the lender.
Many offers may seem like a great deal but some could have penalties fees and charges that you’re not aware of or they may not offer the flexibility that you require down the track
Again a finance broker is there to help you avoid taking out the wrong loan for your personal circumstances.
As always if you have any questions please don’t hesitate to drop us a line or give us a call here at Accountplan. We’ll always be happy to help
Accountplan’s own Mick Doyle has over 35 years in the Australian finance industry and is MFAA accredited. Feel free to call us on 07 3883 8999 and allow Mick to provide you with knowledgeable advice to suit your own circumstances.