Choosing a Direct Lender: The Pros and Cons

Choosing a Direct Lender: The Pros and Cons-ugtechmag.com
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With so many finance options to choose from, it can be difficult to know which is best for you, and one of the biggest dilemmas is whether you should use a direct lender or a broker to find the best deal. There are a few factors you should consider before making your decision, whether you’re looking for a payday loans direct lender, or a mortgage broker that can help you. Read on as we take a look at the pros and cons of applying for finance with a direct lender.

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Contents

What is a direct lender?

A direct lender is a financial institution that offers loans directly to borrowers without the use of intermediaries like brokers or third-party loan originators. This means the lender is the sole provider of the funds requested and is responsible for making all the decisions with regard to the approval process, interest rates and eligibility, as well as terms of the loan.

There are various types of direct lenders that you could choose from if you need a loan, like banks, credit unions, and other types of financial institutions that exist both physically and online that you could choose from. Before deciding whether a direct lender would be the best choice for you, it helps to take a closer look at the pros and cons.

What are the pros of using a direct lender?

Let’s take a closer look at why you may decide a direct lender is the best option for you:

Faster processes: Direct lenders often boast a fast application and approval service, which is particularly useful if you need money quickly – for example, a payday loan to help you deal with an emergency expense. When applications are made through a broker, the process may take longer.

Cost savings: Direct lenders can also offer lower interest rates and fees because they are the sole provider of the funds, therefore they don’t have to pay commission to brokers. This means the cost of your loan from a direct lender may be much less than if you were to use a broker – but you should always double-check the total cost of borrowing before entering an agreement.

More control: Another benefit that comes with working with a direct lender is that generally gives you more control over the process. You can communicate directly with the lender, negotiate, and ask questions easily without having to go through a broker.

What are the cons of using a direct lender?

So, as well as weighing up why you may want to work with a direct lender, it also helps to think about some of the issues you might find by choosing this type of finance. Here are some of the cons:

Limited options: Direct lenders may not have the same range or variety of loans that brokers are able to offer you. Because they have their own products, you’ll need to make sure the direct lender you choose can offer the type of finance you’re looking for.

Higher rates: Direct lenders may sometimes offer lower rates than brokers, but this might not always be the case. Direct lenders offering payday and short-term loans often come with high-interest rates as they have more flexible criteria so those with less-than-perfect credit scores can benefit. This raises interest rates and additional fees.

No third-party assistance: When communicating with a direct lender, you won’t have the help of a third party, which can come in useful if you have questions or need additional advice. Whilst you can ask a direct lender about their product or service, they may not be able to advise you in the same way a broker would.