A broker or direct lender? That is the question. But do you know the answer? Try this two minutes online quiz. It can save you a lot of money. Over 67% of people who took the quiz got most of it wrong!. Click the Direct lender or broker buttons under each photo and see how much you really know
What is a broker?
When you apply on a broker’s website, you enter your information into their system. They then take your information, including your credit history information and give your application a price.
If you have a high credit score, you are reliable in paying back your loans, and your income is high enough (plus a few other factors), your loan application is more likely to be accepted.
Brokers don’t have money to lend to you. So how do you get your money? Along comes a lender – someone with lots of money to lend to you, and they buy your application. That means that they get the rights to lend money to you.
What is a direct lender?
When you apply or a loan on a direct lender’s website, you also enter your information into their system. They take your information and process it. They check your credit score and perform numerous credit and affordability checks. Here is where the process differs from a lender. If you pass all the tests and your application is considered to be a suitable application, the lender itself will transfer money directly into your bank account. They don’t sell your information to anyone, and they don’t give it a price.
Direct lender loans – why are they better?
The advantage of using a broker is that you are more likely to get your loan. But before you go ahead and apply with a broker, read this list:
- If you run into difficulties, it is harder to sort out: The truth is that you don’t know who is lending the money to you. That’s because you only deal with the broker, and the lender also only deals with the broker. You never deal with the actual lender. Besides for the safety issue, which we will discuss soon, you can face more problems if you run into difficulty. Let’s say you had a massive leak in your bathroom that cost half your paycheck to fix. You now won’t be able to pay off your loan until next month. If you apply with a direct lender, you can phone them up. In many cases, the lender will agree to postpone your loan repayments. But if you apply with a broker, you have that intermediary that makes everything more complicated.
- Online Safety: Just imagine what is going on in a broker’s information sharing system. They have hundreds or thousands of loan applications holding sensitive and personal data. Tens of lender companies have access to that data. Think about it, do you really want your data being passed around the web like a bag of popcorn? With all the talk of internet safety, you never do know who is hiding behind that website interface. Be safe and apply with a direct lender.
Who uses Direct lenders and who uses brokers?
When looking for a loan online, every person will look for a loan that matches their needs. One person will want to have a £500 short term loan in their bank account in less than three hours. They probably have their mother in law staying with them, and they need to pay the rent before the landlord comes knocking on the door. Then all the questions will start…
If you are one of these people, you will probably be searching for keywords like “fast” “ quick loan” and “same day payout”. You don’t honestly care who lends you the money, as long as they have it in your bank account FAST. Your eyes don’t even see words like broker, direct lender and pingtree.
Then you have these very organised people. They are planning home renovations in 6 months time and have come to search for the best lender for home improvement loans, (in case they might need one when the time comes). If you are one of these people, you will be looking for keywords like “responsible” “affordable” and “FCA-authorised”. You probably will care whether the lender is a broker or a direct lender. But it might not be your primary concern, right at this moment.
You also get these people who are freaked out by internet security. They might think that the internet is going to collapse any day soon, and will therefore only take direct lender pay day loans from a real shop with a real person. Or they are taking a loan on behalf of their mother in law and can’t afford that anything should go wrong. If you are one of these people (go on, own up!) and you are actually brave enough to take a loan online, you will be looking for keywords like “secure” “trusted” and “direct lender”.
So how do you know if a website belongs to a direct lender or a broker?
Direct lenders are proud of it and like to boast about it on their website. If you are on a website for more than 20 seconds and you still can’t tell whether it is a direct lender or a broker, it is most likely a broker, trying to hide that fact. Here are a few tips to help you:
- Always check the footer. If you see the words ‘Introducer’, ‘Appointed Representative’ or ‘Broker’, it means you’re on a broker website.
- Check the FCA register for the license number. If the company’s authorisation is as a ‘credit broker’, they are a broker.
- Check loan comparison websites. Only direct lenders will feature on loan comparsion websites.
Now that you know the basics about direct lenders and brokers, you’ll know which one to choose when you next take a loan.