Using a broker

The go-between

With so many different lenders and credit providers to choose from, you may decide to get a finance or mortgage broker to do the legwork for you. Brokers can help you find out about suitable loans or credit packages and arrange special deals.

As with any adviser, it is wise to shop around. Do some checking yourself to make sure the loan is suitable and competitive - or you could end up paying more than you need to.

What brokers do

Smart tip

As brokers do not have access to all credit providers' loans, you should also shop around yourself to see what deals are out there.

A finance broker negotiates with banks, credit unions and other credit providers on your behalf to arrange loans. A mortgage broker is someone who specialises in home loans.

Finance or mortgage brokers can offer you a variety of loan options. They can help you select a loan and manage the process through to settlement.

But brokers may be limited to a particular range of products that might not suit your needs or give you the best value for your money.

For example, if a credit provider doesn't pay commissions, the broker might not include their loans on the list of products they recommend.

Who pays the broker?

A broker's fee or commission for arranging a loan is often paid by the credit provider whose products they sell.

Different credit providers pay different commission levels. This can potentially influence what loans the broker recommends to you. Sometimes a broker will charge you a fee directly (instead of, or in addition to, the credit provider's commission).

Find out the fee structure for the broker's service, and compare fees charged by different brokers to make sure you get a good deal.

Things to check when using a broker

If you use a broker, do the following.

Check that the broker is licensed 

Credit providers and brokers that are not licensed are operating illegally in Australia. Make sure you only deal with a company or person who is licensed.

Search ASIC Connect's Professional Registers to check your credit provider has been licensed or you can phone ASIC's Infoline on 1300 300 630.

Find out more about the law and consumer credit regulation.

Find out who you're dealing with

Some people think they are dealing with the lender or credit provider directly, when in fact they are dealing with a broker. If you're not sure, ask who the credit provider or lender is. Consider if there are any conflicts of interest in the advice you are given.

Find out from your broker exactly what loans they offer, who pays their commissions and if they will charge you a fee.

Make a wish list

Make a list of what you want and ask your broker to find a loan that meets as many of these requirements as possible. Also find out what it will cost to have these features. Ask your broker about other home loans or credit packages if you are not satisfied with their recommendations.

Shop around

Look at other loans online or phone other brokers to check what they charge and what they offer to do.

Get a written agreement from the broker

A written agreement should tell you the type of loan being arranged for you, the amount of the loan, the term of the loan, the current interest rate, and any fees you have to pay. The fees could include broker's fees or commissions, fees to the credit provider or lender for setting up the loan, and/or any early termination fees.

Never sign blank forms or leave details for the broker to fill in later. If you feel like you're being pressured into signing something, ask for more time to think about the loan.

Warning about business purpose declarations

Do not sign a business purpose declaration unless you are really using the loan for business and are eligible to claim your repayments as a business expense for taxation purposes. By signing the declaration, you may lose valuable rights under the National Credit Law.

Complain if something goes wrong

If you have a complaint about a broker or a dispute you can't resolve, find out how to complain or phone ASIC's Infoline on 1300 300 630.

A finance or mortgage broker can save you time and money, but you should still do your own research. Be prepared to ask plenty of questions to help your broker find you a loan that meets your needs and offers value for money.

Related links

Last updated: 14 Aug 2015