Personal lender MoneyPlace has set out a proposition for brokers to start offering personal loans, waiving establishment fees until the end of November and announcing a new headline unsecured rate of just 5.95%.
It makes a sea change from where the industry was half a decade ago, where personal loans were regularly offered for 15% and mortgage brokers found them very difficult to deal with.
Alf Vasta, head of broker distribution at MoneyPlace, has more experience than most in the personal loan areas: he was a BDM at Liberty Financial and worked in the space in both the UK and Australia before starting the MoneyPlace broker offering.
“I set the broker channel up at MoneyPlace two and a half years ago, so I can give context,” he told Australian Broker. “If you look at what I said that the time, and what interested me moving over, it was that personal loans have evolved.”
“Rather than just using them transactionally, brokers can use them as part of an overall solution. That’s where education comes in. If you have a broker who is writing a home loan, there are ways that you can use a personal loan: pre-mortgage, mid-mortgage or post-mortgage.”
“Brokers might come to a potential roadblock that is not allowing them to submit the application on behalf the client or they might not be able to fulfil the client’s exact needs. The client might be looking to purchase a property, they need, say, $650,000, but when they run the servicing, they can only get $610,000.”
“Then it’s about thinking: how can personal loans plug gaps in the business? How can they help when you’re stuck with a deal to provide that solution? Can you use a personal loan for a stopgap?”
“Brokers are starting to pick up on that. When I joined two years ago - and I said this at the time - my goal wasn’t to sell MoneyPlace, but to sell personal loans as a viable option for brokers to use in the market to help their customers.”
For Vasta, the industry has changed rapidly and is now an open door for mortgage brokers to walk through to diversify their offering to clients.
“Brokers are now educated enough to work out that personal loans have evolved from the old days,” he said.
“The common myths were that personal loans were too expensive: that was true, because at the banks, you were talking 15%. I’m talking today about a rate of 5.95% for unsecured. That’s phenomenal. We’ve got secured starting at 4.84%. Think back five years and that was double digit.”
“The other myth was that personal loans were too clunky, you’d have to complete manual application that you’d send to the lender, they’d have to load it onto a system and you’d go from there. The bank’s system was geared towards residential. But we’re a fintech, we’re all about technology. To get a rate estimate and lodge a deal with us, it’s five minutes.”
“For brokers, it’s about converting their core business: if you take the example where a client is 50k short on a residential, think about where that personal loan could help. We do gap funding and we do it really well.”
“Then there’s creating new market opportunities. By offering personal loans, brokers will have a better engagement with their customer, and create longer term partnerships. If the customer only knows them as a home loan broker, then when they need a personal loan for renovations, they’ll not go to their mortgage broker for that.”
“They’ll research and maybe go to a different broker, who might specialise in personal loans. By offering personal loans, brokers can retain and keep their relationship ongoing. At MoneyPlace, if you use us for a personal loan, at any stage throughout that 7 year term, you can exit without penalties.”
“If the broker strategy is to use us or debt consolidation to help with servicing, or to avoid LMI, they then might down the track get to the stage where they develop equity and can consolidate our debt. With us, there’s no exit penalty. It’s a really flexible product. That’s so important when you’re talking about personal loans and providing client solutions.”
