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ISCOVER
In the fintech world there seems to be a new personal loan lender, platform or payment provider entering the personal loan “space” every month.
This proliferation is becoming confusing and it makes it difficult to know who to turn to, so this blog is intended to help understand the key differences we see between the emerging fintech lenders and the old guard, deposit-taking institutions.
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Firstly, there is a lot in common between the two types of providers. For example:
- Loan purpose: for common purposes such as holidays and debt consolidation both can meet your needs
- Rate for risk: both groups will offer a different rate for different customers, but the range of interest rates may be broader in the fintech, data-driven world
- Loan terms: all seem to have repayments over many years and allow early payouts without early discharge fees
So what seems to be better about the new world? Here are a number of winning points from our team of personal loan specialists:
- Interest rates are typically better, especially with some peer-to-peer lenders like RateSetter, which is critical to a customer
- Service is typically better as the newer lenders are hungry to steal market share. This is reflected in quicker turnaround times and you can usually speak to the assessor directly
- Support through access to a BDM who is only talking about the one product
- Specialist knowledge as not only are they focused on personal loans, they can also be focused on niche “spaces”. For example, cosmetic surgery or lower quality credit customers
- Systems that are often more advanced and tailored to a personal loan
But where are the old guard still ahead?
- Commissions: these are important to any broker. Some of the larger lenders have a more attractive commission structure with both an up-front brokers' fee, typically charged to the borrower, and a commission based on the loan size
- Size: the balance sheet size of, say, ANZ bank is hard to beat and while some of the new lenders dabble in larger personal loans over $35,000, there can be nerves when there are regular applications for larger $50,000 loans
- Support: a BDM for a bank can talk to a broker about more than one product at a time, but they usually are more focused on home loans and lack the specifics on personal loans
- Brand: a 100 year-old brand name and the security that this gives to a customer presents a low-risk option for a broker when discussing the options with a wary (and perhaps older) customer
In summary, ensuring the right personal loan outcome for your customers now means it’s essential to keep abreast of both fintech and Australian deposit-taking institutions, as well as new entrants and changing policies.
