Personal loan brokers
- Pros and cons of using a broker for your personal loan explained
- Broker costs broken down
- How to find the best broker for you
Personal loan brokers in Australia
A lot of people associate brokers with mortgages, but there are also personal loan brokers. It's not surprising many of us need help, given personal loan borrowing is at record highs in 2023.
Particularly if your finances are complex, a personal loan broker can make it easier to get a loan.
BUT there are trade offs you should know about before deciding if using a broker for your personal loan is a good idea.
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What is a personal loan broker?
A personal loan broker is a finance professional who helps you get a personal loan. They work as an intermediary between borrowers and lenders.
Ideally, they will help you find the most suitable personal loan offer from a selection of lenders.
Some brokers specialise in helping certain kinds of borrowers.
Like people looking for bad credit loans or self-employed people who need a low doc personal loan.
There are also specialist car loan brokers.
What exactly do personal loan brokers do?
If you use a personal loan broker, this is what you can expect:
- They will ask you questions about your financial situation
- They will ask you about the purpose of the loan (e.g. debt consolidation, medical loan etc.)
- Based on your situation, they will assess their pool of lenders and decide which ones may be suitable
- They will then present you with their recommended personal loan options
- Once you’ve decided on a loan, they will deal with the lender on your behalf and advise on how to get your personal loan application approved
What lenders do personal loan brokers work with?
Personal loans brokers work with banks, credit unions, online lenders and other institutions that offer personal loans.
They don’t work with all lenders. in the market. Each broker typically has a relationship with a pool of particular lenders.
This is an important factor when weighing up the pros and cons of working with a personal loan broker.
Pros of using a personal loan broker
First, let’s look at some of the reasons you would consider using a personal loan broker:
- A personal loan broker can save you the time and effort of researching different lenders and loan options.
- They will get to know you and your circumstances so they can understand which loans may be best suited.
- Most brokers will help their clients with the loan application as well.
- They can be particularly helpful if you have a complex situation and standard lenders aren’t suitable.
- Some will offer follow up services, like helping you to refinance your personal loan later on if a better deal is available.
- A lot of personal loan brokers earn their money through commission paid by lenders. This means you don’t pay an upfront fee for their services.
Cons of using a personal loan broker
It’s not all benefits with personal loan brokers. Here are some possible disadvantages you should factor into your decision.
- Some brokers work with a relatively small pool of lenders, so you may not have access to all the best personal loan offers.
- For some lenders who make their money through commission, some lenders pay them more than others. This may influence the broker’s recommendations.
- The brokers who do not earn commission from lenders may charge high fees to their clients.
- If you need a loan quickly, dealing with a broker can actually slow the process down.
- It can be just as much effort to find a good broker as it is to find a good personal loan deal.
- In some cases, brokers work for companies that also offers loans. They may simply try to sell you their own company’s personal loans.
Is a personal loan broker right for you?
Not everyone needs to use a personal loan broker.
It can be very easy to find and apply for a personal loan yourself.
And of course you can use online tools like a personal loan calculator to help crunch the numbers.
But for a lot of people personal loan brokers offer a very valuable service.
Which category do you fall into?
May need personal loan broker
- Not confident dealing with finances
- Has no time to research loan options
- Has a bad credit history
- Self-employed or irregular income
- Needs a specialist lenders
May be able to go it alone
- Confident in applying for a loan
- Happy to do their own research
- Has a good credit score
- Employed and can provide payslips
- Can apply with any lender
How to find the best personal loan broker
If you decide that working with a personal loan broker is the way you want to go, here are some pointers to help find the best one you can.
- Ask for recommendations: A good broker will have plenty of previous experience with clients and lots of success stories and recommendations. Look for online reviews or ask friends and family for a recommendation.
- Ask about their lenders: Make sure they work with a broad selection of providers and don’t preference particular lenders.
- Ask about their commission: It’s also important to understand how they get paid for their services and any effect this may have on the loans they recommend.
Like any other product or service, there are good brokers and ones you want to avoid.
A little research can go a long way to help you find a good broker.
After all, with a personal loan that you could be repaying for up to seven years, spending some time understanding your options will be well worth it.
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GET STARTEDGET STARTEDWritten by
Loans Expert
Shaun McGowan
Reviewed by
Editor
Sean Callery
*Information about comparison rates Comparison rates are designed to allow borrowers to understand the true cost of a loan by taking into account fees and charges, the loan amount and the term of the loan. The comparison rate is based on an unsecured fixed rate personal loan of $30,000 over 5 years. WARNING: Comparison rates are true only for the examples provided and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate.
