13 Oct 3 Reasons to Consider Direct Lender for Your Next Loan
3 Reasons to Consider Direct Lender for Your Next Loan
Not all lenders are created equal.
Most of us, in some capacity have gotten a loan from a indirect lender at some point. Perhaps you took out your mortgage with the help of a mortgage broker? Maybe you went online for a personal loan and thought it was just that simple. Then you get a bill from a lender and wonder what is going on.
A direct lender is someone that uses their own money to lend to you. This means that the company you apply through is making the decision on it’s own and using it’s own capital to fund and service (bill you) your loan the entire time.
An indirect lender, also sometimes referred to as a broker, is an organization that often appears to be managing the process entirely but is using someone else’s money and decision making on the loan. Some may or may not service the loan. Others are more sneaky, and will “sell” your loan shortly after you receive the funds.
Indirect lending as advantages in some cases and we will talk about that later. For our purposes and industry, we will focus on the indirect personal loans. This applies to unsecured loans, bad credit loans, and even online payday loans.
1. Avoid the “Run Around”
A common experience when using a broker for your loan needs is getting shuffled around by various people and companies. If you didn’t feel popular before, you definitely will now. Your phone will be blowing up with calls from all of the lenders that your information was submitted to.
Why is everyone calling you? Often times the broker you submitted your information through doesn’t collect all the information needed to actually make a firm loan decision. They just want you to submit your information so that they can get paid. It appear as easy as possible to attract you. It’s far from it. Now you have 5 different lenders calling requesting more personal information in order to make the decision and get back with you…
2. Less Fees
Why do those companies make it so easy for you to submit your information for a loan? Because they want to get paid. How do they get paid? The final lender. What does the final lender do to make up for this extra cost? Pass it on to you… enough said.
Better yet, don’t pay fees. Borrow at a reasonable interest rate.
3. More Privacy
Not comfortable with all those phone calls and email? Maybe it was the giving your information out to 6 different people that did it for you. Bad news. Generally speaking when you apply throug the first indirect lender or broker, you agree to allow them to share your information with affiliates. It’s almost guaranteed they will add you to all their mailing and email lists to try to get your business the next time around. Even scarrier, some of those lenders may share it with other partners. Gear up for a massive avalanche of mail and email.
With online payday loans and online bad credit loans, your usually better off avoiding indirect lenders or brokers. However, this advice doesn’t apply to everything.
For instance, mortgage brokers now can actually offer some pretty decent deals to people. They allow you to shop multiple mortgage lenders with one credit pull and make an informed decision. Post 2008 banking reforms, the lenders paying those brokers with a fee now simply reduce that from their net income on the deal. The increased volume pays for that cost by the broker sending them business. Pre 2008, brokers added arbitrary fees to mortgages padding their pockets.
Like we said, indirect lenders are not always bad. It is important to be aware of what you’re getting into the next time you go out applying for a loan. Note that there are lenders like Credit Fair-E out there that do online bad credit loans. Don’t think you need to run your infomation through 10 lenders just to get approved.