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As a personal loan provider, you would expect me to write about the popularity of personal loans over other forms of credit. But I have proof!
The latest data from the Australian Bureau of Statistics has shown that the personal finance market is now turning over $8.5 billion per month, an increase of 11.1 per cent on a year ago. In comparison, housing finance has grown 8.97 per cent over the same period. This is a trend being echoed around the world, with the UK also experiencing growth in non-mortgage lending, according to the British Banker's Association.
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I won't pretend that personal loans are suitable for all clients. It depends on their capacity to repay and on their individual circumstances, which should always be taken into account when assessing the appropriateness of a product.
But they can be used for a variety of reasons, whether that's financing house renovations (for those people who don't want to spend decades paying interest on their new bathroom) or the more traditional car loan. We also have clients using personal loans to finance weddings, medical bills, overseas travel and household furniture. With Christmas round the corner, we'll see consolidation of credit card debt in the new year too.
How is this relevant to brokers? Well, diversification has been the top buzzword for 2014 and I've written previously about extending your product range through offering personal loans. Some brokers say it's too hard and they're not worth the time or effort. My response to those brokers is to pose a few questions – what will help with client satisfaction and loyalty? Is it your ability to meet all their needs, promptly and efficiently, rather than saying 'you will need to go to a bank for that'? And what value do you place on client retention?
If the housing market is cooling as the RBA wants and the data suggests, but there are growing numbers of brokers entering the market, it will become an increasingly competitive marketplace. Client retention will become even more important, and looking at alternative revenue streams that complement your existing offer could be an essential part of your profit and risk management strategies in 2015. It's worth considering as you start to wind down for the Christmas period and turn your thoughts to growing business in the new year.
