Within the online marketing for borrowing small loans there are two specific types of lenders who exist. These are known commonly as the direct lenders and the loan brokers. The difference between these two providers of small loans can mean a difference in the total amount payable. That said it would be fair to say that both of these providers offer a service which can serve the needs of consumers. So in order to understand the direct lenders and loan brokers a bit better, lets dive deeper into what it is each of them offer when it comes to short term loans.
As most of us will already be aware, short term loans or payday loans as they are also known, allow us the ability to borrow a small sum of money, usually no more than ÂŁ500.00 in value. The loans themselves are accessible via the completion of an online based application form and in doing so we are usually offered a range of flexible repayment terms.
Depending on our own individual needs this can mean repayments over a few months or several. Generally, a bit of research will reveal the ability to repay over 2 months or 6 months for example. All payday loan lenders whether they be direct lenders or loan brokers, are now regulated by the FCA who are the Financial Conduct Authority. It is the job of the FCA to regulate and monitor the activities of all lenders who offer these type of loans.
Payday Loan Lenders and How to Afford their Loans
So back to the case in point then, what is the difference between direct lenders and the loan brokers of payday loans and why is there a likely difference in the overall cost of borrowing depending on the selection made? Firstly, we will look at the direct lenders of these loans. A direct lender, as the name suggests offers the ability for us to apply with a specific lender and therefore ‘directly’. When we complete the application online, the lender with whom we submitted our details will make an informed decision as to the suitably of our loan request.
When this decision has been made, this same lender will deliver the outcome and if successful, will be the one to deliver the loan to our account. In instances where the loan application is deemed unsuccessful direct lenders will not charge a fee simply for the service of considering your application.
So what does a broker do differently to the service offered by direct lenders? In simple terms it is actually very similar but there are fundamental differences to consider. A broker will consider the information provided in the application and then will attempt to locate a lender who may be able to help with our request. They will make a recommendation to us as to a potential lender based not only on our needs but also the lenders with whom they have an existing relationship with.
This means by using the service of a broker you are not dealing with the lender directly in the first instance and furthermore, a broker cannot promise the outcome of the application will be a success. The main point here is that brokers charge a fee for the service of simply looking for a potential lender.
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