These days, brokers are also known for being more competitive and resourceful in offering competitive and affordable loan products. They have more access to greater players in the capital markets. They also usually come up with better pricing discounts. But have you ever wondered why brokers can provide loans at lower rates than banks?
Lower overhead costs
Brokers are often operating at smaller structures compared to their banking counterparts. This is a significant factor for their ability to offer much lower rates to customers. Because of their smaller scale, brokers are logically maintaining lower overhead costs. They have more leeway to lower their rates and aggressively compete for potential clients.
In comparison, banks can be less competitive in this aspect because they can no longer lower rates as doing so can possibly lead to serious losses. Often, banks also provide fixed rate sheets to their sales representatives and officers. Profit margins cannot be reduced because those dictate income and profitability. Thus, brokers get a bigger pie of the loans marketplace.
Connections with different loan providers
Brokers are not permanently connected or affiliated to particular lenders or loan providers. Often, they are free to roam around the market in search for loan products with better terms and lower interest rates. They can have business relations with just about any loan provider.
It also works to their advantage that brokers have the bargaining power when negotiating for deals with loan providers. They can always assert that they can easily and instantly back out from the negotiation to go to competing loan providers, which may be more willing and open to offer lower-rate loans. In comparison, banks promote and offer only their loan products.
Many brokers even boast of the lower or waived fees they charge to customers for their services. That is because most of them are already receiving commissions from loan providers. That is why they usually opt not to charge borrowers any fee. And this is often received well by customers, who are always on the lookout for ways to possibly save on costs.
Are you planning to find and obtain a loan soon? If your own comparison of rates do not bring about the most competitive you can imagine, you may try contacting any of the active loan brokers in the market. They may offer you loans that may be more attractive than what you have already found on your own.
Having worked in the lending industry for the last 3 years, Andrew has gained serious experience about home loans, small business loans and refinance solutions. Andrew is now spending most of his time blogging and helping people with their finances.