Do you go direct to a lender to get the Loan you need or should you use a broker? It depends on your personal circumstances –sometimes it can be better to approach a lender direct (like a bank) where you already have an existing relationship with them. If this is not the case and you’d prefer to look elsewhere, it might be better to use a broker.
In this article, BestUnsecuredLoans looks at:
- what does a loan broker actually do?
- why do people use a loan broker instead of going direct to their bank?
- how are loan brokers paid?
- what types of loan brokers are there in the UK?
- choosing the right broker for you
- how to apply for finance through leading loan broker, BestUnsecuredLoans.
What is a loan broker?
A loan broker doesn’t lend you any money. What a loan broker actually does is arrange loans on your behalf.
Each legitimate broker in the UK, like BestUnsecuredLoans, must have a licence given to it by the Financial Conduct Authority. The Financial Conduct Authority oversees all consumer lending (that means loans, credit cards, mortgages, and so on) in the UK. They put Brokers through rigorous tests to make sure that the people running them have a clean, reliable history of trading and that they won’t recommend inappropriate financial products to peoplewho don’t need them.
Every broker has its own “panel of lenders”. A broker introduces people who are looking for a loan to the lenders on their panel. All lenders in the UK must also have a licence from the Financial Conduct Authority as well and, as you’d expect, each of the lenders on BestUnsecuredLoan’s panel have the properand correct licences.
Why do people use loan brokers instead of going direct to lenders?
Most lenders are happy to take applications from members of the public directly so why do some people choose to use brokers instead?
It’s because each lender has a “borrower profile” they work to – that’s a set of guidelines describing the types of people they’re happiest to lend money to. Some lenders might only want to give a loan to someone earning over £50,000 a year whereas others are just as happy to work with borrowers earning £15,000 a year.
The problem for borrowers is that most “borrower profiles” are really detailed and in-depth descriptions of a lender’s ideal customers and these profiles aren’t available on lenders’ websites. That means that, in nearly all cases, borrowers are applying for money and they have no idea whether they’re the type of borrower a finance company is happy to lend money to.
You can then end up spending a lot of time applying direct to different lenders just to find the money you’re after. There’s a problem with this though – every time you make an application to a lender, they download a credit report on you and the fact that they’ve downloaded it appears on your credit report. And the more times a download is recorded on your credit file, it makes it less likely that your application for a loan will be approved – even by a lender who would normally want to work with you.
What makes brokers different is that lenders actually do tell them in great detail about the type of borrower they’re happy to work with. That gives lenders the reassurance that they won’t receive applications from brokers that they can’t work with saving them both time and money.
Did you know that there are many mortgage lenders who don’t accept applications direct from the public? Instead, they want to work exclusively through brokers because they know that their broker partners will only send them details of the type of deal they’re happy to work on.
How are loan brokers paid?
There are a number of different ways that a broker gets paid. They are:
- a processing fee – that’s money paid to them by a borrower to get a broker to apply for a loan on their behalf. Processing fees are payable whether the application is successful or not.
- an introduction fee – that’s when a lender pays a broker money for getting a borrower to apply for a loan, regardless of whether they say “yes” to the borrower’s application or not. You, as the borrower, do not pay anything
- a “thank you” commission – this is a fee paid to a broker by a lender when someone has applied for a loan, signed the (online) paperwork, and the money has been transferred to the borrower’s bank account.
BestUnsecuredLoans never charges borrowers a penny, even if we find you a loan and you decide not take it out. We don’t receive introduction fees either because we think that makes brokers apply to as many different lenders as possible rather than focusing on finding just the very best lenders for a borrower.
We only get paid a “thank you” commission by our lenders – we don’t receive any other type of payment. We think that’s the best and most honest way to do business.
What types of loan broker are there in the UK?
Payday loan brokers
Payday loan brokers, like BestUnsecuredLoans, work with specialist panels of lenders who work with people who have had problems with credit in the past few years.
Payday loans are generally for between £50 and £1,000 and borrowers pay the loan and the interest back in one instalment within 30 days of taking the loan out.
Some payday loan brokers charge a processing fee and they also take either an introduction fee and/or a “thank you” commission. BestUnsecuredLoans charges borrowers nothing to use our services and we’re only paid when we’ve arranged a loan for you which you’ve then taken out.
Short term loan brokers
A short-term loan broker, again like BestUnsecuredLoans, works with lenders who offer people with less than perfect credit histories loans of up to £5,000 with up to 12 monthly repayments.
Short term loan brokers, sometimes called instalment loan brokers or quick loan brokers, sometimes charge an introduction fee and then they receive further payments from the lender on top of your fee.
BestUnsecuredLoans doesn’t charge our borrowers for anything – we only receive payment when we’ve found you a loan and you’ve decided to take it out.
Comparison sites
There are dozens of comparison sites in the UK and many of them will compare loans for you so that you can take advantage of the best offers they find on your behalf.
Most, but not all, comparison sites target consumers with high credit scores looking for a loan so they may not be suitable if you’ve had problems with credit in the last six years.
Comparison sites generally don’t charge you for using their service and they receive a commission every time one of the people using their site takes out a loan.
Mortgage loan brokers
Mortgage brokers arrange mortgages for people looking to either buy a new home or find a new mortgage provider for their existing home.
Mortgage brokers generally charge both a processing fee and a “thank you” commission from a mortgage lender. They may also waive a processing fee by getting your agreement to sign up to other financial packages like life insurance, home insurance, and more.
Commercial loan brokers
Commercial loan brokers, unlike consumer loan brokers, do not have to be regulated by the Financial Conduct Authority.
Commercial brokers tend to arrange working capital loans, commercial mortgages, expansion loans, equipment loans and more. Commercial brokers generally tend to charge a processing fee and they will also receive a fee when a deal is successfully placed and the loan or other type of finance has been taken out.
What to look for in a payday loan broker or short-term loan broker
If you need a payday loan or a short term loan now to cover an emergency bill, please bear in mind that every payday loan and short term loan lender has their own “borrower profile” too. Because of that, we think it’s better, quicker, and cheaper for you to use a broker like BestUnsecuredLoans to work with you to find the right loan.
When you’re choosing a payday loan or a short-term loan broker, look out for the following:
- They are licenced by the Financial Conduct Authority
- They are registered here in the UK
- They have a wide panel of lenders to give you the best and cheapest offers you receive
- They’re not tied to or affiliated to a particular lender meaning they’ll favour loans from those lenders. This could result in higher interest charges for you over the lifetime of your loan
- They can move as fast as you want themto in providing you with the finance you need
Apply for a payday loan or short-term loan through best-unsecured loans
How do you apply for a payday loan or a short-term loan through BestUnsecuredLoans?
It’s simple. Fill in our form with your details – we’ll ask you about how much you earn each month, what you spend each month, who you work for, what you do, and where you’ve lived for the last few years.
As soon as we have your details, we’ll contact all the payday loan and short-term loan providers on our panel of lenders. Within seconds, we’ll get back offers from our lenders and we’ll then present you with the very best deal we can find for you.
You’ll know how much our lender is willing to advance you, how much interest they’re going to charge, and when you have to make the repayments. You’ll also know how much each repayment is going to be so you’ll be able to work out straight away whether it’s affordable for you or not.
All this happens within seconds thanks to BestUnsecuredLoans’ advanced computer system and thanks to our close relationship with lenders on our panel. To get started, just click here.
