Broker — Definition, Types & How Brokers Work

A broker is a licensed intermediary who connects borrowers with lenders. In the Australian lending market, brokers play a central role — arranging everything from home loans and business loans to asset finance and personal loans. Rather than dealing directly with a single bank, you work with a broker who compares products across multiple lenders to find a structure that fits your circumstances.

What is a finance broker?

A finance broker (sometimes called a credit broker or lending broker) holds an Australian Credit Licence (ACL) or operates as a credit representative under an ACL holder. Their job is to assess your borrowing needs, compare loan products across their lender panel, and submit applications on your behalf. Brokers handle much of the paperwork, negotiate terms, and guide you through settlement.

Unlike a bank lender who can only offer that bank's own products, a broker typically has access to dozens of lenders — from major banks to non-bank and specialist lenders. This gives you broader market coverage without having to approach each lender individually.

Types of finance brokers

Mortgage brokers specialise in home loans, refinancing and property investment lending. They compare rates, fees, offset features and loan structures across their panel and help you navigate pre-approval, valuation and settlement.

Commercial and business finance brokers arrange funding for businesses — working capital, equipment finance, commercial property, trade finance and cash flow products. Business broking often involves more complex credit assessment, including analysis of financials, ABN history and security structures.

Asset finance brokers focus on vehicle, plant and equipment lending. They arrange chattel mortgages, finance leases, hire purchase agreements and novated leases for both business and personal borrowers.

Insurance brokers arrange risk cover across multiple insurers. While not credit brokers, they are often involved alongside finance brokers when asset insurance is required as a condition of lending.

Many brokers operate across several of these categories. A full-service broker might arrange your home loan, your business equipment finance, and your vehicle loan under one relationship.

How brokers are regulated

All finance brokers who arrange credit regulated by the National Consumer Credit Protection Act must either hold an ACL or be authorised as a credit representative under a licence holder. ASIC is the regulator and enforces conduct standards, licensing requirements and disclosure obligations.

Key regulatory obligations for brokers include:

• Best interests duty — since 1 January 2021, mortgage brokers must act in the borrower's best interests when recommending a credit product, not just ensure suitability. This duty is set out in Part 3-5A of the NCCP Act and is enforced by ASIC.
• Responsible lending — brokers must make reasonable inquiries about your financial situation, verify the information, and make a preliminary assessment that the loan is not unsuitable before submitting an application.
• Disclosure — brokers must provide a Credit Guide at the start of the relationship, setting out their licence details, the lenders they work with, how they are paid, and how complaints are handled.
• Dispute resolution — brokers must belong to an external dispute resolution scheme. In Australia, this is AFCA (Australian Financial Complaints Authority).

You can verify any broker's ACL or credit representative status on the ASIC Connect Professional Registers.

How brokers are paid

Understanding broker remuneration helps you assess whether a recommendation is genuinely in your interest.

Upfront commission is paid by the lender when your loan settles. For home loans, this is typically 0.5%–0.7% of the loan amount (excluding offset balances). Business and asset finance commissions vary by lender and product.

Trail commission is an ongoing payment from the lender for the life of the loan, usually 0.15%–0.20% per annum of the outstanding balance. Trail incentivises brokers to place loans that perform well and to maintain the client relationship.

Broker fees are fees charged directly to the borrower. Some brokers charge no direct fees (relying on lender commissions), while others charge a fixed or percentage fee for complex deals — common in commercial and business lending where deal structuring is more involved.

Clawback provisions mean the lender can recover part of the upfront commission if the loan is repaid or refinanced within a set period (usually 12–24 months). This is a cost risk for brokers, not borrowers, but it's worth understanding because it can influence recommendations.

Brokers must disclose all commissions and fees in their Credit Guide and in the loan proposal document.

Benefits of using a broker

Using a broker gives you access to a broader range of products than any single lender can offer. Brokers save you time by doing the comparison work, handling paperwork and managing the application process. For borrowers with complex situations — self-employed income, multiple securities, visa restrictions, or non-standard assets — a broker's experience navigating different lender policies is particularly valuable.

Brokers also provide ongoing support. If your circumstances change, a good broker can help you restructure, refinance or access additional funding without starting from scratch.

How to choose a broker

When selecting a broker, consider:

• Lender panel breadth — how many lenders do they have access to? A broader panel means more options.
• Specialisation — do they focus on the type of lending you need (residential, commercial, asset finance)?
• Licence status — confirm they hold an ACL or are an authorised credit representative. Check via ASIC registers.
• Fee transparency — do they charge broker fees on top of lender commissions? Are all fees disclosed upfront?
• Communication — are they responsive? Do they explain their reasoning and keep you informed throughout the process?
• Reviews and referrals — what do other borrowers say about their experience?

Broker vs bank: when to go direct

Going directly to a bank makes sense if you have a straightforward borrowing need, an existing relationship with a lender who offers competitive terms, or if you prefer dealing with a single institution. However, for most borrowers — especially those comparing multiple products, dealing with complex income structures, or arranging business finance — a broker offers broader market access and independent guidance.

A broker does not replace your own due diligence. You should still read loan contracts carefully, understand the total cost of the loan, and satisfy yourself that the product fits your needs.

Aggregators and broker networks

Most brokers operate under an aggregator, which provides access to lender panels, technology platforms, compliance support and professional development. Aggregators negotiate volume-based agreements with lenders and pass through commission payments to individual brokers. The aggregator model is a defining feature of the Australian broking industry and affects which lenders and products a broker can offer.

FAQ

Key takeaways

A finance broker is a licensed intermediary who compares lending products across multiple lenders to find a suitable match for your borrowing needs. In Australia, brokers are regulated under the NCCP Act, must hold an ACL, and are required to act in your best interests when recommending credit products.

Further reading

• ASIC — Credit licensing
• ASIC — Using a mortgage broker
• AFCA — Make a complaint

This article is general information only and is not legal, tax or financial advice.