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Tips on how to create more secured loans and mortgage enquiries

The main area of future growth for secured loans is predicted to come from the mortgage intermediary and IFA sector. But second charge lending is still often an after thought for brokers.

By adopting loans as a core and complimentary element of the advisors product, broker can attract more remortgage enquiries and make more income from each opportunity.

This document will hopefully prompt thoughts on how you may be able to generate new secured loan and remortgage enquiries, and how to cross-sell additional products to new, and existing clients.

This document contains

1. Generating more loan enquiries means more remortgage enquiries
2. Case Studies
3. Common Objections
4. Advertising

In an attempt to make this document of value to those both new and more experienced in generating loan enquiries, certain items may seem obvious to some readers. Please take what ever value you can find and disregard anything you don’t need. We don’t mean to state the obvious but accept that, for certain readers, we may have done exactly that. Sorry.

Generating more loan enquiries means more remortgage enquiries

Get comfortable with loans and new enquiries will find you

Firstly establish a ”loan mindset”. This doesn’t mean favoring loans – it means naturally considering loans in your client dealings and marketing. Just reading this short document may be enough.

Some brokers tell us “I don’t do secured loans because no-one ever asks for it” and others say “if someone asks for a loan I just tell them I don’t do them”. By having a reasonable understanding of the products and their application, brokers can experience a significant increase in opportunities. In fact the loan opportunities were always there – they just didn’t spot them, or worse, walked past them. “Build it and they will come”

Of course actively prospecting for such opportunities will create even more loan and remortgage income so promotion and awareness need to work together. Get comfortable with the circumstances where a secured loan may be accepted but a remortgage wouldn’t so it becomes second nature to tick off loans as one of the options in your head. – Of course, if in doubt, call us.

Do any of your clients fit the following circumstances?

  • They are self employed without proof of income, including recently self employed
  • Higher income multiples or alternative affordability calculations are required
  • They need one of our various plans for light, medium and heavy adverse
  • They have low income, pension and benefit income
  • A 2nd charge loan is needed on BTL properties
  • The loan is for business purposes, to clear IVA’s or pay off tax bills
  • Short term lending is needed – many loan enquiries turn into bridging loans
  • They need the money quickly

DON’T FORGET – with rates from 7.9% a secured loan may also be preferable where;
* You don’t want to remortgage due to clients good mortgage rate
* You want to avoid ERC’s
* Adverse credit prevents a remortgage or a decent mortgage rate

If they don’t know what you do, they wont ask.

Are YOU front of mind when your clients or business contacts think “Loan, consolidation or extra cash”?

When raising a small amount of cash, customers are likely to think Loan rather than Remortgage.

However, a £5,000 loan enquiry can regularly turn into a £25,000 + loan or a remortgage once a full fact find has been completed. That’s why it is so important that your clients know you can arrange both loans and remortgages. If they don’t come to you they may end up on the internet, with a loan broker or another advisor?

In any communication, ensure there is a strong message making it clear that you can arrange loans. However, beware expanding on the types of loans you can offer as this will open you up to many onerous compliance requirements within your communication – keep it simple “Loans also available – call me for details”

Where possible, design your communication to your clients with their needs in mind. For example a consolidation message in January to coincide with the credit card bills arriving.

Test and Learn

Ideally you would only market to those customers who will 100% have a need for your product. This will invariably not be the case in reality, and the key is to target your customers well or to keep your costs low so your abortive costs are covered by your successful sales. If your previous marketing has been very targeted to your existing clients, you may find that current market conditions mean you need to widen your product range or widen your target audience to maintain your flow of enquiries. Potentially consider doing both, as cross-selling alternative products can increase volumes of new customers and create incremental income from previously abortive enquiries.

It is important to define your product offering and match this to your target audience. The lower the cost of your marketing, the less discerning you can afford to be and can “throw more mud at the wall”. This can bring in new types of enquiries and build the awareness of your brand and the wider range of products and services you can offer

Compared to many larger companies your proposition is likely to be underpinned by the promise of a local, personal, professional service. Consider how you can reach a larger local audience and attract more enquiries with a wider product offering. This could result in lower abortive costs and a lower cost per acquisition for your core product.

The following is a list of low cost suggestions and ideas which you can personalise to your own business model and potentially use where you feel appropriate. Most can be used on a low volume basis but can be scaled up dependant on the level of success.

Who introduces clients to you? How much business could they generate? – get sample letters from our website

Leveraging your existing relationships can be one of the most effective ways of boosting enquiry levels which again, may generate both loans and remortgages. Also, the good news is, you can inform them easily and generate referrals without having to worry about consumer credit advertising regulations. For example:-

  • Do your accountancy contacts know you can raise loans for people who have only been self employed for a short time and don’t yet have any accounts or projections?
  • Do they know you have loans available for clients with heavy adverse?
  • Do you deal with any debt solution companies who would benefit from knowing you can arrange loans to pay off Iva’s or arrange full and final settlements on loans which have gone into arrears?
  • Are your current introducers aware you can arrange business loans and bridging finance?
  • Are you a member of a business Network/Club? Are loans on the agenda for the next meeting?
  • Are you a member of Linkedin?( LINK TO OUR GROUP ON LINKEDIN) Have you updated your profile to include loans and added the niches you can fill to your specialities section? Once done, send an update to your contacts telling them. It’s instant and very easy.

Hopefully there is enough information in this document which you can cut and paste and send to your business contacts for some quick results.

Beware High Volume High Cost Campaigns

One of the key issues in trying to generate additional leads in a competitive market is to keep your cost of acquisition down. There are many lead generators offering mortgage and loan leads of varying price and quality.

In addition, there are many opportunities to advertise in the press and on T.V. All of these opportunities generally involve a significant upfront outlay and need to be monitored and judged on an individual basis.

Remember there are companies which have already invested in this area, know what works and have built a brand. You are up against these established brands. If you are offered the deal of the century, it is probably because someone else has tried it and it didn’t work.

Brochure Door Drops – Log in to our website and get sample brochures which you can edit and print.

Try self delivered, newspaper inserts or “Walk Sort” deliveries via the Post Office. This can work well if you offer a range of useful services. However you need to ensure you stand out from the crowd. The offer of a local and personal service may help. Beware private delivery companies. You have no way of monitoring if they have delivered your brochures and we have experience of thousands of brochures being dumped.

Piggy Back Mailings and Newsletters – get compliant personalised newsletters from our website including a section all about loans

If you are corresponding with your clients, insert a brochure or a newsletter which explains that you can now arrange loans. The stamp and envelope has already been paid for. Beware stand alone brochures as the compliance issues and costs can be onerous however you can buy personalised compliant newsletters very cheaply. Alternatively a simple P.S. on your existing correspondence can be cheaper and very effective.

“P.S. I now can arrange loans from a wide panel of lenders. Please call me if I can be of help”.

JV Mailing

Do you know other companies who are writing to their clients and will allow you to insert your letter or brochure within their correspondence? Clients clearly need to be of the right profile but, with an amendment to the covering letter, you may be able to leverage off their brand and existing relationship and offer a commission split on completed loans. Your JV partner may also benefit by widening their product base as this can generate more new customers for them. Normally you would be responsible for the brochure costs and would share commissions with the JV partner. Of course you could promote a whole range of services in this way, not just loans.

Point of Sale – brochure give away’s

Similar to the above, this could include low volume campaigns such as a brochure dispenser in a local solicitors or accountants office. They often get footfall from self employed people looking for help. Anticipate low cost, low volume but good conversion rates.

Alternatively you may agree a deal to put a brochure in the shopping basket of every customer visiting your local independent supermarket. This is likely to generate higher costs, a small response rate but reasonable local branding. In this less targeted approach, consider promoting the widest product offering.

Remember, if you have a shop frontage or are located where there is a good footfall, then consider posters to be displayed in a prominent position advertising your other cross-sell products. Potential customers do not know unless you tell them.

Website

Point all your advertising activity to both your telephone and your website. So many people don’t realise the importance of their website in direct response. When we used to advertise loans in the national papers, up to 40% of our responders preferred to apply via the website rather than pick up the phone. Ensure that your website accurately reflects all the products and services you can offer and provides an appropriate response/enquiry mechanism. Beware putting a long application form on your website. Whilst a short form may require a follow up phone call, a long form can significantly depress response. Consider integrated banners with local newspaper websites, Yell.com, local town directory, touchlocal.com. This can give you a local presence at a very cost effective rate.

Recommend a Friend

Incentivise your current customer database to recommend a friend and reward them accordingly to the product that is taken up.

Telemarketing

How often do you talk to your database? Telemarket it with all the great news of your new ancillary products. This can be done at the quieter times in the week – your customers may appreciate the call if you are looking to talk to them with a saving or a new product, especially now in these difficult times.

Repetition

Whilst you may, or may not, generate some enquiries instantly, keep repeating the message. It’s all about timing and making sure potential and existing clients are reminded of your product range. They might not need you today but may in 12 months time.

The Acid test

When you meet someone new at a party and they ask what you do, how do you answer?

A. I am a Financial advisor OR
B. I advise people on a range of services to help them save money or make money including, mortgages, loans, a variety of insurance products, etc etc etc.

Option B is much more likely to prompt further discussion and the same is true of your marketing and general correspondence.

Don’t tell people what you are – tell them what you do

Case studies

Clients on a Low SVR

Often brokers look at the interest rates of Secured Loans and quickly dismiss them as they are higher than a remortgage alternative, however, with a Secured loan, the higher rate is only on part of the deal, not the whole capital, and can in many cases work out with a lower monthly repayment than a remortgage alternative.

Consider a client on a deal of 0.29% above base on a £400,000 interest only mortgage on a property worth £520,000, and requires £40,000 for consolidation. The Best deal the broker could find for the client at 85% was at a variable rate of 3.49%

Taking a Secured loan of £40,000 at an APR of 14.0% for £452 per month worked out as the best fit for the client, as you can see below

Interest only remortgage
Current Deal Interest Only Secured Loan Cost of Current Mortgage+Secured Loan Re-mortgage Interest Only
Loan Size £400,000 £40,000 £440,000 £440,000
Rate 0.79% (Variable) 14.0% APR Variable 0.79% Mortgage + 14.0% Loan 3.49% (Variable)
Term 25 Years 25 Years 25 Years 25 Years
Monthly Payment £264 £452 £264 + £452 = £716 £1,280
Loan and existing Mortgage £564 cheaper than a Remortgage (£716/month compares to £1,280/month)

 

Capital and Interest remortgage
Current Deal Capital and Interest Secured Loan Cost of Current Mortgage+Secured Loan Re-mortgage Capital and Interest
Loan Size £400,000 £40,000 £440,000 £440,000
Rate 0.79% (Variable) 14.0% APR Variable 0.79% Mortgage + 14.0% Loan 3.49% (Variable)
Term 25 Years 25 Years 25 Years 25 Years
Monthly Payment £1,470 £452 £1,470 + £452 = £1,922 £2,201
Loan and existing Mortgage £279 cheaper than a Remortgage (£1,922/month compared to £2,201/month)

 

Client tied into current deal

A client faces a £10,000 redemption penalty to get out of their existing deal, but requires an additional £30,000. A Secured loan was arranged with just a £995 packager fee, with monthly payments of just £281 and carried a redemption fee of 2 months interest. The client was then able to remortgage after 12 months, during which time the Secured Loan had cost circa £4,929 (repayments, redemption, Packager fee) £5,071 less than the redemption charge on their existing mortgage.

Client cannot remortgage – has adverse credit

2 years ago the client had lost their job. They managed to make some payments from savings but arrears and charges quickly mounted and the client fell 6 months behind on their mortgage as well as defaulting on numerous accounts. After over a year out of work the client finally found new employment and Promise were able to raise a new loan for them, albeit at a high rate up at 75% LTV. This loan enabled the client to clear all arrears and charges and allowed them to take control once more. Once the client has 12 months of clear credit we will then either be able to look at a new Secured Loan or the broker can remortgage at lower rates.

Current Income multiples are not sufficient for a remortgage

Secured loan lenders apply different multiples based on affordability. This can often give us more income to play with so a loan can be placed where a remortgage cannot – this works particularly well where the current mortgage is on a very low rate or is interest only. In more extreme circumstances, we have lenders which will take more benefits and unusual incomes into consideration including Self Employed income without accounts or without an accountant’s reference.

Client has unsecured arrears and affordability problems – Can my client avoid Debt Management?

Can’t raise enough capital to pay off all of your client’s debt and insufficient income clear part of them? If your client is falling into arrears, a Full and Final settlement could be the answer.

In a recent example our brokers client needed £39,000 to clear all unsecured credit which had already fallen into arrears. A penny less would not do as there was insufficient income to leave any credit outstanding and service a new proposed loan. Promise negotiated reduced settlements with all unsecured creditors and arranged a loan of £24,000 to pay off the lot.

As well as keeping a happy client with the potential of more personal referrals, the introducing broker earned over £1,300 for the Secured Loan referral, and a further £863 from the full and final settlement. The client was ecstatic having reduced monthly outgoings by £870 and knocked £15,000 off their outstanding debt.

Common Objections

“I don’t want a secured loan; the rates are far higher than a remortgage.”

APR rates are normally higher than a remortgage rate but reflect the fees charges and the repayment term of the loan. The longer the repayment term, the lower the APR. Remind the customer why you are exploring the second charge route – you have already tried your panel of mortgage lenders and the customer has not qualified for any deal, the ERC’s are too high or remortgaging may result in a higher overall cost. Loan rates are likely to be lower than credit cards, overdrafts and store cards that the client may be consolidating and redemption penalties are circa 1 month’s interest. The client can then always remortgage at a later date when they are out of their fixed period or are able to qualify for a deal they want.

“Why am I being charged a large broker fee?”

Historically secured loans carried high early settlement penalties, often in excess of 6 months interest. Also loans were normally accompanied by the lender’s insurance policy which was expensive. Consequently secured loans were very profitable but the costs were largely hidden from the borrower. Recent regulatory changes have resulted in lower redemption charges (1 month to 2 months interest maximum) and lender’s insurance has largely disappeared. Therefore loans are much more transparent to consumers and rather than the set up costs being hidden, a fee of 10% is normally added to the loan. This fee goes towards the direct costs of arranging the loan such as valuations, legal search’s, mortgage references, consent from the first mortgagee. If the loan doesn’t complete, the broker has to absorb these costs so any fee charged also contributes towards abortive costs on other loans. In addition the broker has to cover general staff costs, fixed costs and most significantly the marketing costs, such as introducer payments.

“I don’t know who these lenders are – how can I trust them?”

Most of the lenders on the panel do not deal direct to consumer but through intermediaries, that’s why the customers may not have heard of them. You can see some further background information to the lender on the ‘lender’ tab on the products page of Promise Quote. All of our lenders are regulated by the FSA. Indeed many lenders are subsidiaries of national banks and building societies – White Label are a subsidiary of the West Bromwich Building Society, Blackhorse are part of Lloyds Bank, Nemo are owned by the Principality Building Society, First National and igroup are owned by GE.

“I don’t want a secured loan, I don’t want massive penalties to pay it off early”

All of our secured loans are regulated under the CCA therefore the early redemption charge is usually 1 month, up to a maximum of 2 months interest, which is lower than ERC’s on many mortgages.

“I want to keep the repayments low”

Some of our lenders will look at 30 year terms which can help keep your monthly payments as low as possible and the loan can be redeemed when finances allow with 1 to 2 months interest as a maximum ERC.

“I’m worried they will repossess my house if I can’t keep up repayments”

Here you could ask why the client thinks they won’t be able to repay the loan. Also remind them that repossession is always the last thing a lender wants to do, and will try to help in times of difficulty. Of course, if your client says they fear redundancy or losing their income due to sickness or injury, then you can offer optional insurance to help in such an event.

“My mortgage lender will not give consent”

We have lenders on our panel who do not need permissions from the current First charge lender.

“I already have a secured loan on my property”

Borrowers should consider paying off the existing secured loan, along with other outstanding credit. However, if for any reason this is not an option for the client, we do have lenders who will offer a third charge, although normally at higher rates than a second charge.

Advertising

Our advice is keep it short and simple

Unfortunately the Consumer Credit Advertising regime is complicated and differs from the FSA regime. Therefore great care needs to be taken not to confuse a loan advert with a mortgage advert. Also, if more information is provided within the advert, it can trigger additional regulatory information being required including typical APRs.

Therefore a simple statement or a P.S. on a letter keeps matters clean and easy such as;

Wide choice of loans also available   OR   Ask about our range of loans

For brokers who wish to create their own advert, or incorporate loans into their existing marketing, we recommend that, in order to generate loan enquiries, any adverts are still kept as simple as possible. Phrases such as ‘low cost loan’, ‘CCJs’, ‘self employed considered’, ‘rates from 8.0% APR’ will trigger a requirement to provide further regulatory information which in turn is likely to result in the creation of non compliant advertisements. An example is shown below which could be added in to marketing material, whether that be in print or in their shop window.

Secured and Unsecured loans

Name of advertiser ( as shown on the consumer credit licence)
Telephone number
Website address
Address (Required except where advert is displayed on office premises)
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A
MORTGAGE OR OTHER DEBT SECURED ON IT (This needs to be upper case)

If the advertisement is being carried alongside any FSA advertisements, care should be taken to ensure that the loan advertisement appears separately to the FSA regulated advertisement to avoid further rules coming into play. This can be done a number of ways, such as the advert being on a separate page, in a separate style or being information which is clearly separate from any information relating to a mortgage.

Should you wish to put more information into your advertisements, such as interest rates, claims of low rates, offerings for particular categories (self employed, CCJs, declined elsewhere), it will open up further rules and requirements, including the responsibility to calculate the typical APRs on an ongoing basis and to ensure that each element of the advertisement is afforded the appropriate degree of prominence. Mentioning consolidation of debt will also require additional statements.

If you make statements in your advert which requires you to display your Typical APR within a brochure or advert, the Consumer Credit Act defines a typical APR as;

“the typical APR” is an APR at or below which the advertiser reasonably expects, at the date on which the advertisement is published, that credit would be provided under at least 66% of the agreements which will be entered into as a result of the advertisement. In the case of an advertisement which falls within section 151(1) of the Act, “advertiser” means the person carrying on the business of credit brokerage.

Based on the loan completions you have with Promise, we can calculate your typical APR on request. If you are just starting to offer loans, or targeting a new audience, we can provide you with an indication of an appropriate Typical APR to use within your advertising.

Should you wish to create your own advertisements it is imperative that you study and follow the detailed guidance on the OFT website.

For more information, call Promise 01902 585 052