If you’re looking to get a payday loan in the UK, you have likely encountered both direct lenders and brokers as a part of your search – but how do they differ? Getting the right payday loan for you requires you to be as informed as possible about what your options are, so being familiar with the differences between brokers and direct lenders, as well as their benefits, is essential.
So what actually are they?
Direct Lenders or Brokers?
To get started, it’s important to first understand the difference between direct lenders and brokers, as while they can both offer you a payday loan, the path will be different.
A direct lender is a fairly simple prospect – they are a singular loan company, and every dealing you have concerning your payday loan will be with them. This means that you apply to them, they process your application and make a decision, and then they will organise your payment directly from their company loan funds. As a result, direct lenders are very simple to understand.
Brokers are a little more complicated. A broker is an aggregate service, which means that they work with multiple lenders to offer their clients deals. So you make your application to the broker, but rather than processing it themselves, they present your application to their multiple partners. They each consider your application before providing an offer. Finally, you make your decision and apply to the loan company that made you the best offer through the broker.
Which Is Better?
There isn’t a simple answer, as neither is technically “better” – there are benefits and drawbacks to both, depending on your circumstances and how you want to approach your loan. So let’s have a deeper look at what you should consider about both direct lenders and brokers.
One of the main benefits of a direct lender is that they are simple and relatively quick to deal with. You only make one simple application to one lender, they make their decision, and if you are approved, they will pay you – often the same day, depending on how early you applied. This level of simplicity also extends to your interactions with them, as you will only need to interact with one company if there is an issue with your loan or you need some clarification about certain points.
A drawback of direct lenders is the loan offer you have is the loan offer you get. They will offer you a payday loan package, and that is their offer. There’s generally no negotiation or a path to a lower offer, so you have to take what you get compared to shopping around.
Something else to consider is that if you happen to be refused your loan for any reason, or you decide you don’t like the terms of your offer, you will have to find another loan company and make another totally fresh application with them before waiting for another decision. As people generally need payday loans in a relative hurry, this can make it an overly time-consuming prospect.
The benefit of a broker is that with one application, you can get multiple offers for the same loan, so it allows you to see which is the best deal for you easily. So whether you’re looking for certain repayment terms, interest rates, or indeed the lowest repayment amount, you can easily see which loan company is offering you the most attractive terms.
Another clear benefit is that you only have to make one application, and it automatically gets sent to many different lenders. This makes brokers a much quicker prospect in some ways, as if you happen to get declined for a loan with one broker, you automatically have offers from other ones. In addition, you don’t have to make an application to each lender.
This benefit has another element to it. Certain circumstances, such as a bad credit score, can make it difficult for you to find a loan, which means making an application to an individual lender could be a waste of time if they refuse it. With a broker, you have access to a much broader pool of lenders, so have a better chance of finding a loan.
With brokers, something to consider is that they too will require a fee for their services – namely, taking your application and presenting it to their lending partners. Most brokers charge a fee to lenders to offer their services, and some charge a fee to customers. This isn’t a “disadvantage” as such, as brokers offer a valuable service. It’s just something for you to be aware of.
Which Is Best for You?
There’s no right or wrong answer when choosing a payday loan lender – whether you do it via a broker or apply directly to a lender, all that matters is getting your loan.
If you value simplicity, already know of an attractive loan package from a company, and have a reasonable to good financial history, you might want to consider making your application to a direct lender. This can be the simplest and quickest path to getting your payday loan.
If you’re not sure of the best terms for you, however, or you have a slightly worse financial situation, you might want to consider a broker. They will be able to take your single application and present it to multiple lenders, allowing you to get several different offers. This means you can browse them at your leisure and choose the loan that will work best for you. Despite there being more parts to the process, it doesn’t really take any longer to get a payday loan through a broker than it does through a direct lender.
Whichever you choose, always make sure you’re totally clear of the terms you agree to and be positive that you can afford to keep up with the repayments across the loan term.