What is a broker?

A finance broker (also called a credit broker or lending broker) assesses your borrowing needs, compares finance options across their lender panel and submits the application on your behalf. They handle much of the paperwork, negotiate terms and guide you through to settlement. Unlike a bank, which can only offer its own products, a broker typically has access to dozens of lenders, from the majors to non-bank and specialist lenders, so you get broader market coverage without approaching each one yourself.

Brokers tend to specialise. Mortgage brokers handle home loans, refinancing and investment lending. Commercial and business finance brokers arrange working capital, equipment finance, commercial property and cash flow finance, which often means analysing financials, ABN history and security structures. Asset finance brokers focus on vehicle, plant and equipment deals such as chattel mortgages, finance leases, hire purchase and novated leases. Many work across several of these under one relationship.

Anyone arranging credit regulated by the National Consumer Credit Protection Act must hold an Australian Credit Licence or be authorised as a credit representative under a licence holder, and you can verify either on ASIC's professional registers. Brokers must make reasonable inquiries about your financial situation, verify it and assess that a loan is not unsuitable before submitting it, and mortgage brokers must go further and act in your best interests.

At the start of the relationship a broker must give you a Credit Guide setting out their licence details, the lenders they work with, how they are paid and how complaints are handled. A broker arranging consumer credit must also belong to an external dispute resolution scheme, which in Australia is the Australian Financial Complaints Authority (AFCA). Brokers arranging business purpose finance sit outside the NCCP Act, so ask what licensing and dispute resolution scheme a commercial broker has.

Lenders pay an upfront commission when your loan settles, calculated as a percentage of the loan amount, and often an ongoing trail commission calculated on the outstanding balance, usually paid monthly. Trail rewards brokers for placing loans that perform and for maintaining the relationship. It is standard on home loans but often absent in asset and equipment finance, where commissions vary by lender and finance type.

Some brokers charge no direct fee and rely on commission; others charge a fixed or percentage fee for complex deals, which is common in commercial lending. Lenders can also claw back part of the upfront commission if a loan is repaid or refinanced early, typically within the first six to twenty four months, depending on the lender. That clawback is a cost to the broker, not to you, but it is worth knowing about because it can influence recommendations. All commissions and fees must be disclosed in the Credit Guide and the loan proposal.