HeadingText

Below we list a 10 top tips for finding the right broker for you, explaining how they do their trade and what you need to know.

1. There are over 12,000 loan broker firms in the UK, so there are plenty to choose from. Brokers range from big companies that employ hundreds of advisors, to one-man bands, and are listed in major directories like Yellow Pages, on the Internet and in specialist magazines. You can get a shortlist of three financial advisers in your area from Independent Financial Adviser Promotions (IFAP).

2. Make sure the broker you deal with is authorized by the Financial Services Authority, either directly or as an appointed representative of a principal. Regulated brokers should be listed on the FSA website: www.fsa.gov.uk

3. Loan brokers have access to literally thousands of loan products, so they can scour the market for the best deal to suit your requirements. And of course they need payment for their service. Brokers either charge a flat fee, or charge you nothing but receive commission from the lender, or a combination of both. They are legally bound to tell you if they will be receiving payment from a lender, and must specify how much if the figure is more than $250.

4. Loan advice is now regulated and only qualified and authorized brokers can advise on products across the whole market. There are literally thousands of deals and many brokers deal with a panel of lenders.

5. If you need other financial advice, for example, on pensions or investments, be aware that advisers are regulated by the FSA in these areas. Unlike loans, advisers dealing in investment products have to be either tied to one provider or an independent financial adviser who can scour the whole market.

6. Do not be afraid to ask questions. The loan market is full of jargon you may never have encountered before. If the broker mentions anything, even one word, that you do not understand, ask them exactly what it means. A loan is a big undertaking, so make sure you know exactly what is entailed.

7. It makes sense to use a broker if your loan requirements are not straightforward. If you are self-employed, you have a damaged credit history, you are using the loan for an unusual purpose or have any extraordinary needs, going to a broker who can scour the market could be the most direct route for you.

8. It can make sense to use a broker if you have never taken out a loan before. Even if your loan needs are very simple, the process of arranging a loan can be daunting. A broker can take the mystery out of the process, so you might feel more comfortable doing it yourself the second time around.

9. Be honest with your broker. They will carry out a ‘fact find’ to establish your financial position. Do not be tempted to overstate your Income or downplay existing debts or other financial commitments. Remember that it is a criminal offence to lie about your income on a loan application form.

10. If you have a problem with a broker and wish to make a complaint about them, you can report them to the Financial Ombudsman. Regulated loan brokers are registered with the Ombudsman, so you could stand to gain compensation with the offending broker via the Ombudsman.