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Benefits of Using A Finance Broker

Benefits of using finance brokers

Deal With Finance Brokers in Australia For Loans.

There are a number of benefits dealing with finance brokers, as opposed to trying to find the best loan for your individual situation by applying to banks and finance companies yourself.

This article will look at the main benefits finance brokers in Australia have vs applying for a loan; especially online on your own.

Finance brokers deal with all types of loans. The main two being home loans, for purchasing a house and personal loans for purchasing a car; often referred to as car loans.

As far as lenders; such as banks and finance companies see it, there are secured loans and unsecured loans.

  1. Secured loans.

    Secured loans are loans that are secured, generally against the item you are financing, such as a house or car. A ‘bill of sale’ is taken by the lender over the item as security in case the repayments are not being made on time. if you default on the loan repayments the lender can repossess the house or car, selling it at auction to recoup the money they are owed.

  2. Unsecured Loans.

    In the case of unsecured loans, there is no security taken. Interest rates are generally higher for unsecured loans; compared to secured loans, because of the greater risk to the lender.
    Examples of unsecured personal loan uses could be taking out a loan for a holiday or for a wedding. These items are not tangible; there is nothing that the bank can take security over. This is not to say that they can’t take security over something else you have of value, like the family car if you own it freehold. In some cases a bank may only approve an unsecured loan to a person with that added security.

There are 6 main factors that banks and finance companies use to decide whether to approve a loan; or not and are often referred to as the 6 ‘C’ of lending as documented by finance expert Nigel Brookson.

The 6 ‘C’ of Credit Assessment are:

  1. Capital – Lenders look at your asset position in relation to your age and income; what you have to show for your income that is tangible, houses, cars, and savings are examples of assets.
  2. Capacity – Can you afford to make the repayments based on your income, and expenses. If you do not have any savings a Lender can say that your living expenses are equal to your income; in other words you do not have enough disposable income to live your day to day life to make the repayments. Unpaid defaults show that capacity is a problem; as you can not pay these off.
  3. Credit – Your credit file will reflect past credit history, and its performance, the number of applications is flagged at 3 in 3 months, and 6 in 6 months, and any more is considered ‘credit shopping’.
  4. Collateral – Does the Lender have a fall back position if the loan, or credit extended is not met, how secure do they feel, what would happen if the repayments were not met.
  5. Character – Looks at stability in residence, and employment. Most Lenders, particularly Banks are conservative, and look at a 5 year picture for both. 3 changes in that 5 year period is a negative trigger. Lenders will favour full-time employment, and home ownership/mortgage.
  6. Conditions – Sometimes there are outside factors that a Lender can become aware of that are not on current public records, and is gained from their own data base, including past credit history, or a factor that is ‘flagged’ by Lenders as a possible problem, x-bankruptcy is one.

All banks and finance companies add different weight to each of these criteria and at different times of the month, so it is very hard for consumers to know which lender is more likely to approve a loan application for them – this is the main benefit of using finance brokers.

Finance brokers have a ‘panel of lenders’ they deal with on a regular basis; often many times a day, so they are aware of the buying habits each particular lender displays. They can look at your details and application, deciding which lender will most likely approve a loan based on your unique circumstances.

Many people are unaware that by applying to multiple lenders in a short space of time, unsuccessfully can harm your chances of being approved and cause a negative effect on your credit file, with a number of attempts making you appear desperate for credit. The benefit of using finance brokers is they will target one lender; who they see as being the best option, using their experience and knowledge of the different lenders from their panel.

Another benefit of using finance brokers in Australia is that they can often get an answer much quicker because they speak with the people that make the decision.

You can also benefit by using a finance broker because they often come to you, even for personal loans, so you save time running around to different lending institutions yourself.

Lastly, finance brokers offer a range of insurance products that can protect you as well as the item you are wishing to finance, packaging it all up for you in the one loan repayment.

Take a look at the finance brokers in the state of Australia you live in and benefit from their experience.

Article written by: Josh Story

Josh Story is a licensed building supervisor in Australia, founder and owner of 'Trades Check'.
Follow him on Twitter, Google+ and Facebook.

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