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Should I use a direct lender or a broker?
26th June 2020
If you’ve been searching for a loan you may have come across the terms ‘direct lender’ and ‘broker’ being used to describe different companies. Before you use either, it’s important to know the difference between them and what each option will mean for you.
Using a loan broker
A broker acts as a middleman, assisting you in finding a loan. They’ll collect your information and search through different lenders to find a loan that matches what you’ve asked for. If you select one of the loans, the broker will pass you over to your selected lender for you to complete your application with them. A loan broker won’t lend you any money, just help you in your search.
Some brokers may charge you a fee for using them, whilst others will earn commission from lenders so it’s important to check this before you enter your details. All UK loan brokers must make it clear in all communication with you that they aren’t a direct lender. They must also disclose the full fees and charges of any loans they show you, just like the lender would have to.
If you’re going to use a broker, you should check the firm is authorised with the Financial Conduct Authority (FCA). You can do this by searching for them on the FCA register.
Using a direct lender
A direct lender is the company who provides you with a loan. They’re responsible for carrying out the necessary credit and affordability checks to ensure the loan you’re applying for is suitable. If your application is approved by them, they’re the ones who you’ll have your loan agreement with and who will arrange to give you your money. The loan will then need to be repaid back to them over the time frame agreed when you took out the loan. Using a direct lender can make getting a loan quicker as you go straight through them, rather than waiting for a broker to return their results.
There are several different types of UK direct lenders such as: banks, personal loan companies and credit unions. Like with a broker, you should always check whether a direct lender is authorised by the FCA by seeing if they’re listed on their Financial Service Register.
Should I use a broker or a direct lender?
If you’re keen to find as many loan options at once without the hassle of searching for them, using a broker could be ideal for you. A broker will show you all the loans that match your requirements, allowing you to narrow down the options a lot easier. This saves you filling in applications to a direct lender that could be rejected. However, you may be charged by a broker for using their services, with a direct lender you’ll only have the costs of the loan.
Using a broker may not be the best way to find a loan if you have a bad credit history, this is because they don’t carry out the same extensive checks on your credit file like a direct lender does. This means they could show you loans that you aren’t eligible for or, could end up costing you more money than if you found a loan from a direct lender.
Getting a direct lender loan, gives you more time to research each company and decide if their loan is the right one for you. You can find out about the different terms they offer and whether they have any extra fees for things like missed payments or early repayment. They also normally list their loan eligibility requirements on their website, which will save you applying to them and potentially having a ‘hard search’ on your credit file if you aren’t eligible. You can also speak directly to them and ask any questions you may have.
Doing your own research upfront and applying for a direct lender loan you feel confident in, is often the best way to handle taking on emergency credit.
Is Dot Dot a direct lender?
Dot Dot Loans is a direct lender, you can apply online for one of our loans and if your application is approved we will lend the money directly to you. Our direct lender loans range from £200 - £4000 with fixed repayment terms of 3 to 48 months depending on the amount that’s borrowed. You can view a full range of our loans on our loans by time page.
