Do you know the difference between a broker and a direct lender? With all of the jargon surrounding borrowing, it’s easy to get confused. And at Bamboo, that’s the last thing we want you to be – we want everything to be simple and easy to understand.
That’s why we would like to tackle a few common questions, misconceptions and misunderstandings that people have about borrowing and lending terms.
What is the difference between a broker and a direct lender?
They sound like they do quite similar things don’t they? And if you were to ring either and ask for a loan, they’d both be able to sort you out. And so, realistically, it doesn’t make a difference if you go through a broker or a lender, right? You still get a loan, either way.
Well, yes and no. You’re right that you’ll still end up with a loan at the end of the process, it’s just that the process is quite a bit different.
First up, let’s get the basic difference between a broker and a direct lender out of the way. In short, a lender (like us, for instance) provide you money. You speak with us directly, we come to an agreement, the money goes into your bank account.
On the other hand, a broker is an agent who offers loan products that are provided by a whole host of various lenders. They act as a representative for the loans companies and usually work on commission for the loans they facilitate.
In many ways, they’re a lot like a comparison site, except they have a personal relationship with the lenders and are able to broker better deals than their online counterparts.
Which one should I use? A broker or a lender?
Well, obviously, there are advantages and disadvantages to both.
Many people argue that you have an extra level of security by working with a broker – if they make the wrong decision for you, then they are accountable – and that they have better relationships with banks and lenders to negotiate you a better deal. Also, they’ll do all of the leg work for you, which is a pretty tempting offer!
There’s also the argument that they have access to a lot more options, making sure that you get the best possible deal, rather than being restricted to a certain lender.
All of these points are true, and if you have a good (or fair) credit score and are not 100% sure of what kind of loan you’re looking for, then a broker can help you negotiate the slightly scary minefield of jargon and confusing terms and conditions.
However, for those with poor credit, then working directly with a lender can have its advantages. Although brokers liaise with both you and the lender, they don’t have access to the same information on your credit score as the lenders, and as such, won’t have such a good knowledge of what you qualify for. As such, approval rates through a broker are not guaranteed.
With a lender, you’ll deal directly with the people that will be lending you money, have access to your credit score, and will be able to give you a quick – and definitive – answer to how much you can borrow. Plus, because they have full access to your credit score, they’ll often be able to offer you better rates than the broker can negotiate based on the limited information brokers have.