Finance Brokerage Query

andy777_2

Hi,

This post may be on the wrong forum but there seem to be so many clued-up people on here that I thought I’d take a chance.

I am investigating setting up a business like a mortgage brokerage except that instead of mortgages I shall be helping people to choose the best unsecured loan for their needs and circumstances.

Although a brief search on the web suggests that there are lots of brokers offering loans, many of the posts I’ve read elsewhere on MSE suggests that many intermediaries are unable or unwilling to help borrowers make the best choice.

So, my questions are:

(1) Is there a need for such an advisor or is the market already flooded with brokers?
(2) Is there a need for large capital resources to start such a business or, once the necessary knowledge is acquired, the main costs are a website, a PC and some funds for marketing? e.g. does one need to buy specialised software?
(3) Do networks exist for unsecured loans as they do for mortgages?
(4) What are the commission rates paid by lenders for unsecured loans?
(5) As far as regulation is concerned does one just need a Consumer Credit Licence and to register for the Data Protection Act, or does one need authorisation from the FSA?
(6) How does one find the lenders that deal with a particular segment of the market (e.g. near prime) and who at the lenders should one speak to about forwarding client applications for their consideration?

Any answers or info you can give will be much appreciated!!!

JoeK_3

Hi Andy, yes you will need a consumer credit license and data protection registration.

I am however extremely concerned at the lack of knowledge and expertise that you currently carry. My immediate thoughts are that you should consider going into business with individuals that already have the expertise on board.

Hope this helps

JoeK

dwsjarcmcd

Andy,
I would echo JoeK reservations but I will try to answer some of your questions.
1. The market is awash with way that consumers can get personal loans, from brokers to comparison sites and all points in between.
2. Unless you intuatively know each deal from each company then I would suggest some softwear is required (as is in-depth market knowledge)
3. Don't know, but never heard of any. Suggest not as they are regulated by the CCA, not the FSA.
4. Around 1%, but with an average loan of about £7-£8k, and with poor conversion rates, unless you are doing bucketloads of these, it's probably not worth it. Also this is a very competative market and if a lender is doing business via brokers, it can be different to the mortgage market in that they will charge differnt rates direct.
5. Joe has answered.
6. I'm afraid this really shows why you need much more research in this market.

David

dunstonh

IFAs and mortgage advisers can advise on loans but there isnt the money in it. £8000 with 1% commission is £80. Its pocket money and you cannot live off that.

I cannot see a sole trader only doing unsecured loans being successful.

toonfish

I wasn't even aware that lenders paid commission on unsecured loans. At 1% though you'll never make a living at it.