This is a question that is often asked, so it seems worth covering a few points from different perspectives which may help shine some light on the differences (or opportunities) presented by working with one or the other.
When you’re considering applying for a loan, it makes more sense to approach a broker than it is to approach a bank because of the sheer range of options that are available to you, due to their independence. This is only one of many benefits.
When applying for a loan, having someone who understands the application process and how to best ‘sell’ you, as opposed to selling their own product (banker), will greatly improve your likelihood of approval.
Loans can vary in nature, from personal, to mortgage, to business, and the way these are applied for, and set-up can be vastly different, which is why it is important to get tailored advice. Brokers are registered financial advisers who can assist with giving you advice on ways to best structure your lending to ensure it is appropriate for your circumstances, and future intentions.
Pricing is particularly important when it comes to a mortgage, and your ability to negotiate a better rate will come from your knowledge of the rates at that point in the market. Brokers will see a range of rates from all lenders in the market and will be able to leverage off their knowledge of these to ensure you get the sharpest rate – this is often far stronger than leaving you on your own to negotiate with your bank.
Banks will typically have an open/closed door policy when it comes to criteria that must be met when in need of a loan. Brokers however, have access to a range of other lenders outside main-banks, such as finance companies (non-bank lenders), who typically have out-of-the-box solutions for varying circumstances. This means that if you’re told no by a bank/banks, it doesn’t necessarily mean that you can’t get finance, it just means that you don’t fit main-bank criteria.
Independence is important when applying for anything. Insurance is another example of this. Someone who is able to focus on your needs by providing the most adequate product in the market for you specifically is always going to come out on top when offering solutions to your situation. This isn’t necessarily a reflection of the banker, but does highlight their limitations.