Choosing Finance with a Finance Broker

Submitted by Anonymous (not verified) on Wed, 08/26/2009 - 12:48

Finance brokers usually have a range of banks and lenders available and this range of available lenders is often referred to as the brokers panel of lenders. Some finance brokers have a limited range of lenders while other brokers have a wide range of banks and other specialty lenders on their panel.
An individual finance broker consultant almost always must be personally accredited with each and every bank and lender on the finance broker companies panel of lenders before the individual is authorised to submit loan applications to a specific bank or lender for a customer.
Most finance brokers are happy to provide clients with a list of the lenders with whom they are accredited and also the different commissions they may receive from those banks or lenders. In some states of Australia this information must be provided to an applicant by law before the finance broker can proceed to lodge a loan application for the client. This information is often provided to applicants in a finance broking contract.
After discussing a clients requirements a finance broker will usually carry out a loan serviceability calculation which calculates the amount of available funds a client has that could be used to repay a loan. A serviceability test helps to determine the approximate maximum loan size, or borrowing capacity, an applicant or applicants may be able to apply for. This can vary between different banks and lenders due to a range of factors.
Once serviceability and borrowing capacity is established the next thing that is usually established is the security if any for a loan. Some personal loans are available unsecured as are credit cards but generally finance for vehicles, plant and equipment and property is secured by the item the loan is being taken out to purchase.
Often cars and plant and equipment can be financed up to 100 percent of the purchase price using either a personal loan, lease, commercial hire purchase, novated lease, chattel mortgage or an operating lease. Using security to take out a loan usually results in a lower cost for the finance compared to unsecured finance.
Property finance has the loan to value ratio calculated to determine the equity or interest the purchaser has in the property compared to the loan size and subsequent exposure the lender has. A finance broker can help calculate the loan to value ratio for a property purchase and the benefits or disadvantages of different loan to value ratios.
Higher loan to value ratios may have a requirement by the lender that the loan has lenders mortgage insurance. Lenders mortgage insurance is often required to protect the lender from any shortfall if a property ever has to be sold off due to a loan being in default.
A finance broker will help their clients to calculate a complete purchase cost calculation
Once an actual required loan size that can be serviced by the applicants is known a lender can be selected and the loan application prepared by the finance broker at the loan applicants direction.