Understanding Fee Types

Asset finance involves various fees that impact the total cost of your client's loan. As a broker, it's essential to understand these fees to better advise your clients.

Upfront Fees

These fees are paid at the start of your client's loan and include:

Establishment Fee: Charged by the lender to set up the loan, typically ranging from $300 to $800.
Application Fee: Covers the processing of the loan application, usually between $200 and $500.
Documentation Fee: Incurred for preparing loan documents, typically $100 to $400.
PPSR Fee: Personal Property Securities Register registration fee, fixed at around $6.
Broker Fee: Your commission or fee, often 0-5% of the loan amount.

Monthly Fees

These are ongoing fees that your client will incur throughout the loan term:

Account Keeping Fee: A monthly charge for managing the loan account, usually $5 to $15 per month.
Administration Fee: Additional administrative fees that some lenders may charge.

Capitalised vs. Non-Capitalised Fees

It's crucial to understand the distinction between these two types of fees:

Capitalised Fees
- Added to the loan principal
- Increase the Net Amount Financed (NAF)
- Raise monthly repayments
- Interest is charged on these fees

Non-Capitalised Fees
- Paid upfront using the deposit or customer funds
- Do not affect the loan amount
- Reduce the total interest paid over the loan term

> Tip: Discuss with your clients the implications of choosing capitalised versus non-capitalised fees to help them make informed decisions and potentially save on interest.

Impact on Total Cost

When advising your clients, consider the total cost of the loan, including all fees:

Compare the total interest paid over the loan term.
Include all upfront fees in the cost calculation.
Factor in ongoing monthly fees throughout the loan term.

By understanding and explaining these fees, you can help your clients make better financial decisions and optimize their asset finance solutions.

Understanding Fee Types