What Are The Differences Between A Direct Lender & A Broker?
There are a lot of people in the country who do not know the difference between a direct lender and a broker, do you? When it comes down to loans and borrowing, different companies play different roles.
When applying for a loan, the road is not always straight. You may struggle to get your hands on a loan and find a direct lender isn’t willing to lend to you. But, what can you do for help in this situation? Will another direct lender or broker be able to help?
What is a direct lender?
Here at LoanPig, we are a direct lender. We allow you to apply for a loan using an online application form and if you are accepted we then directly lend you the funds in which you applied for.
Why do people use a direct lender?
Some people prefer using a direct lender to a broker as they know the exact lender they will be dealing with. Once you apply, your application stays with that one lender only unless stated otherwise. This way you will have had the time to do your research and to ensure that the specific lender is perfectly suited to you. Along with this, when using a direct lender, your application process can be very straight forward and simple.
Benefits & Drawbacks of Direct Lenders
Some people prefer to use direct lenders and others prefer to use brokers. But, to decide which you are going to use, you will need to know the benefits and drawbacks of both.
| BENEFITS | DRAWBACKS |
|---|---|
| No hidden costs. | May take longer to find a direct lender as you have to apply individually. |
| Regulated by the FCA to stop any unfair lending by direct lenders all over the UK. | Harder to find individual lenders who lend to those with a poor credit score. |
| Fast and easy application and process after you have been accepted. | May not offer the exact loan amount you want to borrow. |
What is a broker?
A broker can be an organisation which you apply through to try and get a loan, instead of applying to individual direct lenders over and over again until one finally accepts you. They usually consist of a panel of lenders meaning that when you apply to the broker, they send your application through to all of the lenders on their panel until one accepts you.
Why do people use a broker?
A lot of people tend to find that applying for a loan through a broker is a lot quicker, especially if you think your application may be rejected from direct lenders. If your credit score is not perfect and you are unsure who would accept your application, you may find it difficult to find a lender suited to you. Unless you applied to various different lenders at one time, your process could take months. Along with this, the last thing you want is too many hard enquires on your credit report causing your score to decrease. Therefore, people tend to use brokers so that they experience a faster process and their credit score is not as damaged.
Benefits & Drawbacks of Brokers
Similarly to lenders, there are both benefits and drawbacks to brokers too.
| BENEFITS | DRAWBACKS |
|---|---|
| More likely to find a lender who will accept your application without having to do the research yourself. | Does not give the freedom of choosing a specific lender. |
| Acts as a middle man, therefore this saves you time. | May take a while for your application to be viewed or accepted. |
| All of the lenders you may be connected to will be legitimate and not scammers. | May have a higher interest rate depending on the broker. |