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This week, we’re looking at a question that lots of people ask when they’re considering borrowing money: why choose a direct lender over a broker?
Well, the broker/direct lender issue definitely falls into that category.
A direct lender and a broker both sound like they do the same thing, right?
At least from a borrower’s perspective, you go to them, say how much you need to borrow and (hopefully) get approved to borrow the money.
In a very simple sense: you can get a loan from either a broker or a lender, so they must be pretty much the same thing, right?
Well, no. Not really.
So what’s the difference? And why choose a direct lender?
Well, in a nutshell, a lender provides you with the money directly. You speak to them directly and exclusively, come to a legal agreement and then the money goes into your bank account.
The money you borrow comes straight from your lender. No middle men.
Alternatively, a broker is an agent who offers loan products, just like a lender, but that doesn’t actually lend you the money themselves.
Instead, they act as representatives for various lenders and work on commission from the loans they facilitate.
Now, as we’ve mentioned in previous articles, some people suggest that working with a broker can get you access to better rates because they have close relationships with the lenders.
And sometimes that is true, to a certain extent.
For people with a great credit score, working with a broker can make the process of borrowing money slightly easier. You speak to a broker, they make the decision and get you the best deal they can. Sometimes, this deal is better than you’d get from a lender.
However, for people with poorer credit, it doesn’t really work like that.
Brokers don’t have access to the extensive information about your credit history that a lender does, so they can’t get a proper understanding of what loans you qualify for. As such, you usually end up with a loan product that isn’t the best available to you.
Instead, here at Bamboo, we look at your credit report to see whether you qualify for a loan based on lots of different criteria. And then, based on that criteria, we can choose a product that helps you get the best possible rate.
On the other hand, if you went to a broker, they only have access to your credit score to look at. They have to make an educated guess at the best product you qualify for. Sometimes, these educated guesses can mean that you miss out on loans that you’d be better suited for and that would save you money in the long run.
So if you’re still wondering why choose a direct lender, remember that you’ll be dealing directly with the people that will be lending you money and who will be making decisions based on your credit report.
Going to a lender is quicker too. Lenders can give you quick answers to how much you can borrow in minutes, while brokers have to ask around and take their time.
Now we’ve covered why choose a direct lender, let’s look at some other direct lender/broker FAQs.
Is Bamboo a direct lender?
You betcha! At Bamboo, we want to help people with less-than-perfect credit scores get their lives back on track.
That’s why we like to deal with you directly. By taking a closer look at your credit report, we can often offer loans that other lenders wouldn’t be able to so you get the best possible loan.
How can I tell the difference between a direct lender and a broker?
Really good question! Look out for the phrase “loan providing service” — that sneaky wording is the hallmark of a broker.
The law is very clear about what brokers aren’t allowed to say. But some brokers cleverly suggest that they’re a direct lender.Also, if you’re being charged fees on top of the interest, you’re probably dealing with a broker.
Some lenders tend to overpromise, too. If you hear promises of guarantees before you’ve even had an eligibility test, then you’re probably speaking to a broker too.Direct lenders, on the other hand, are usually completely transparent and upfront about their fees and who their products are right for.
Finally, what should I look for in a direct lender?
If this Why choose a direct lender article has you convinced that a direct lender is for you, then make sure you’re choosing a lender that’s authorised by the Financial Conduct Authority.
All UK lenders have to be authorised by the FCA by law, so it’ll stop you falling foul of an illegitimate company.
And just for good measure, at Bamboo, we’re also members of CIFAS to help prevent fraud and CCTA to ensure our practices are always ethical and fair.
If you’re thinking about choosing a direct lender to get a loan (even if you have poor credit), we’re here to help. Take our eligibility test to see how much you could borrow today.
- Author The Bamboo Team
- Posted 8 July 2019