Zero Fees: What's the hype?

Zero Fees: What's the hype?




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Exit fees, completion fees, renewal fees... The charges surrounding lending criteria can be extensive and confusing. A borrower is unlikely to understand exactly what all these charges refer to, let alone be able to distinguish between them.

One company which prides itself on its zero fees approach is Fincorp, whose marketing strategy revolves around transparency. The mantra of the company as a whole and of the Director Nigel Alexander in particular, is ‘clear and simple’. He explained the logic behind their strategy. “Fincorp charges no fees for a number of reasons. Firstly, taking this position makes us almost unique in the market which acts as a major selling point in attracting clients.

“Secondly, offering zero fees is clear and simple – there is no small print to wade through and it is easier for everyone to understand,” he said.

Nigel Alexander stressed how easy it is for potential borrowers to be seduced by the headline rate. “One lender may only charge a rate of 0.9 per cent while others in the market charge 1.5 per cent but there are 3 per cent of fees hidden in the small print. We don’t have any small print.”

So how easy is it to sell a higher rate when companies are offering extremely low headline rates?

“It’s an easier product for brokers to sell,” he told us. “You pay a single rate and that’s it. It’s easy for them to explain to clients.”

Terry Markham, Director of The Funding Operation, highlighted the importance of being upfront with customers: “Some companies do charge hideous sums of money, and then it’s all about making the customer understand that you are not the one charging the fees. I prefer to use lenders with no upfront fees.”

It is up to the lenders and the brokers to explain to customers exactly what they are signing up for, yet fees are often buried in the small print. Nigel Alexander believes that loan documentation should be as clear as possible. “Loans are a huge commitment; it’s like taking on a mortgage.”

Terry Markham explained that some fees charged may not necessarily go straight to the lender. “There is the valuation fee, but that usually goes straight to the valuer. Some companies also charge an administration fee on completion, but that is not an upfront fee.”

Whilst headline rates can seem very attractive at first glance, the additional fees that go alongside these low rates means that Fincorp’s zero fees offer remains extremely competitive.

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