How Secured Loan Broker Fees Are Structured
Broker fees for secured loans typically fall into one of three structures. The most common is a flat fee added to the loan — for example, £1,500 is added to the loan balance and you repay it as part of your monthly payments over the loan term, with interest charged on the fee amount throughout. This structure means the broker is paid immediately when the loan completes, and you bear the compounded cost over the full term.
Some brokers charge an upfront fee paid directly to them, which is not added to the loan. This avoids paying interest on the fee but requires you to have the cash available at completion. A small number of brokers charge a percentage of the loan amount — typically 1% to 2% — rather than a flat fee. On a large loan this can be expensive: 1.5% of a £100,000 loan is £1,500, but 1.5% of a £200,000 loan is £3,000.
Typical broker fees in the secured loan market range from approximately £500 to £2,500, though this varies by broker, loan size and complexity. Some brokers who describe themselves as fee-free actually receive a procuration fee from the lender rather than charging you directly — this is disclosed in their fee information and is a legitimate model used widely in the mortgage market.
FCA Requirements Around Fee Disclosure
Under the FCA's Consumer Credit sourcebook and the Mortgage Credit Directive (for second charge mortgages), brokers must disclose the nature and amount of any fee they will charge before undertaking regulated mortgage activity or credit broking. This disclosure must be given in a durable medium — in writing or electronically — and must be provided before any credit search or application is submitted on your behalf.
The disclosure must state the actual amount of the fee in pounds and pence where possible, or where that is not possible (for example if it is calculated as a percentage of the eventual loan), it must explain how the fee will be calculated and provide a worked example. Brokers cannot bury fee information in the small print of a terms and conditions document — it must be clear, prominent and given at the point of initial contact.
If you are charged a broker fee that was not disclosed to you before you applied, you may have grounds to complain to the broker and ultimately to the Financial Ombudsman Service. Always request fee disclosure in writing before proceeding with any application, and retain a copy for your records.
