If you’re looking to borrow money or secure a mortgage, you may be unsure which is the best option; to go to a direct lender, or use a broker. Before you decide, it’s important to understand what both do and the benefits associated with each option.
What is a direct lender?
Direct lenders like luckyloans.co.uk are an organisation who, if your application is successful, will be able to lend you money. This could be a cash loan or a mortgage. They will often be a bank or loan establishment who you apply to directly. They will then be the decision maker on your loan or mortgage. There is generally no reason for your details to be passed on to a third party if you deal with a direct lender. However, they will be unlikely to tell if the best deal is available elsewhere, because that would result in sending potential customers away to a competitor.
A direct lender can be your own bank, and this can be the easiest option. However, it may not always work out as the cheapest option. You can approach direct lenders at a bank or other institution which you’re not currently a customer of.
What is a broker?
A broker is a third-party institution. They will have intense knowledge of the loans and mortgages available. While more costly than dealing with a direct lender, because brokers charge a fee, they can help with the process of applying for a loan. They will be more likely to get the best deal for you, because, as their customer, you are their priority. They use several factors such as your income, residency status, your budget for a deposit and/or your ability to make the repayment; to search only for the financial products that are applicable to your individual circumstances. Brokers can charge a fee or commission, sometimes both, so it’s important to check how they expect to be paid.
The benefits of using a lender
• Dealing with a lender directly cuts out the middle-man. If you have questions, you should get an answer quicker than if you were communicating through a third party.
• It may sometimes be easier to negotiate a better deal by using a lender, and they will be able to check for any rates they offer, which could better suit your needs.
• Easier and more direct communication with the potential to get a cheaper loan or mortgage.
• Unlike when using a broker, a lender won’t charge you an additional fee because you are dealing with them directly.
• If you have the time and knowledge to find a direct lender, you may be able to get yourself a better deal, because not all lenders will work with brokers. The ones which don’t could have the best offers for you.
• Because you’re dealing directly with them, there is likely to be a faster turnaround, which can be beneficial if you’re looking to borrow money quickly or secure a limited time offer on a property.
The benefits of using a broker
• If you struggle to understand the intricacies of financial issues, interests rates and how to find the best financial products, a broker can guide and help you through the process.
• A broker can help you with making applications.
• No direct dealings with the lender, which some people might find daunting. A broker can talk you through the loan before you decide to sign anything and if you don’t understand something, you may feel more comfortable asking them rather than a lender.
• If you’re busy, a broker can save you the time and effort of tracking down the best lender. They will have in-depth knowledge of the options available to someone in your circumstances. You won’t need to keep explaining yourself to more than one lender until find the right one.
• The money a broker saves you could end up being more than the fee you pay them. They can also negotiate on your behalf to have any application or appraisal fees reduced or waived. Many people can feel uncomfortable doing this.
• A broker can deal with all the paperwork.
• They can also chase up applications, which is useful for people who don’t like being pushy.
• A broker could have access to information that isn’t readily available to the public.
Generally, many people use a broker because the world of lending can seem like a financial minefield. However, as some of the above benefits point out, there can be plenty of good reasons for using a direct lender too.