MonthApril 2019

How are credit brokers getting paid?

The mortgage broker can be solicited by both banks and borrowers. Whether free or paid, this professional will systematically receive a fee from the bank in which the loan is granted. The notion of “free broker” means only that the free broker will not charge fees to his clients . Efficiency of one and the other does not come into play.

What are the methods of remuneration of a broker?

What are the methods of remuneration of a broker?

Facilitating the connection between a bank and the borrowers, the broker can receive a commission from the bank and fees from his clients:

  • Representing approximately 1% of the amount of the loan granted, the remuneration commission is precisely defined in the commercial agreements entered into between the broker and each bank. Note that it is not reflected in the borrower’s financing proposals. It comes in exchange for a relationship that would not necessarily be made without his help: they are paid as a business contributor.
  • Paid by the customer, the fees of the broker are freely fixed by the latter – either in a fixed way, or around 1% of the amount of the loan granted. Reminder: this remuneration is payable only if the mortgage is signed, in accordance with Article L321-2 of the Consumer Code.

In any case, the mortgage broker can only be paid if the loan file is accepted. They therefore have every interest in denouncing the weaknesses of a financing plan, in correcting it and thus optimizing the chances of going to committee.

Are paying brokers more efficient than free brokers?

Are paying brokers more efficient than free brokers?

The concept of “free broker” is intended for borrowers : these professionals simply chose not to charge their clients. However, this intermediary does not offer his services for free, but his services are covered by the commission of the bank.

In fact, the free broker is not like a discount broker : his quality and skills do not come into play in this appellation. Moreover, all these professionals are subject to the same regulations of Intermediaries in Banking Operations and Payment Services (IOBSP) and the same code of conduct (Code Monétaire et Financier).

Before the actual payment of the money intended to finance the purchase

Before the actual payment of the money intended to finance the purchase

On this point, the paying broker has the obligation to establish, in writing, the amount of his fees, which can not be perceived – in any way – before the actual payment of the money intended to finance the purchase.

Whatever the method of remuneration adopted, the use of a broker generally allows the buyers to earn between 0.40% and 0.50%, compared to the offer of a bank made without this intermediary. Knowing perfectly the commercial policy of the establishment, he is competent to negotiate the best rates, according to the profile of the applicant. Obtaining the most attractive offers for borrowers to the most comfortable situations (high level of income, wealth, debt ratio …).

Credit comparison – what are the risks?

Whether or not a loan can be granted depends today mainly on the creditworthiness of the debtor. Collateral often no longer plays a significant role, as have the individual decision-making latitude of banks has shrunk in recent years. On the other hand, the Schufa score is decisive: Debtors with negative entries no longer have good prospects for another loan.

Credit comparison: Credit possible despite low credit rating

Credit comparison: Credit possible despite low credit rating

The reason for this is already existing payment obligations, which supposedly exhaust the financial framework of the borrower. Banks fear an over-indebted situation in which current loan commitments can no longer be met. Nevertheless, the credit comparison without Schufa is worthwhile in many cases; the loan offer is getting richer.

Beware of rogue providers

Beware of rogue providers

No question: Anyone who has had difficulties in the past to meet their payment obligations should think about whether it makes sense to apply for another purchase loan. In fact, the debt trap often snaps faster than expected. This circumstance is favored by the fact that in a loan without Schufa hardly favorable offers will appear.

Even if, for example, a loan from private investors is available with a low credit rating, the increased default risk will be reflected in a higher annual interest rate. In addition, unfortunately, there are also many less reputable providers on the market who would like to enrich the difficult financial situation of some potential creditors: Dubious offers can be found by claiming an agency fee in advance. No honest provider in the credit comparison without Schufa will send the debtor a request for payment for the information alone, before he has received the loan amount.

Credit comparison without Schufa: makes sense for rescheduling

Credit comparison without Schufa: makes sense for rescheduling

But despite the risks of fraud and over-indebtedness: For a credit comparison without Schufa there can be very tangible and logical reasons. For example, if a borrower is burdened with many small installment payment obligations, debt restructuring can be a way to reduce costs. Because in relative terms, many small loans are always more expensive than a single, larger loan commitment – the annual percentage rate simplifies a comparison considerably. In addition, it is clearly easier for the debtor to manage a single loan.

More here. Anyone who wants to get an overview of the savings potential of a debt restructuring, should look at once the credit comparison without Schufa: With indication of loan amount, term and purpose can quickly find suitable offers – just without obligation and try it for free.