What is the Difference Direct Loan lender or Broker?
When one shops around for loans, it is common to find a large number of advertisers, which listing includes both direct loan lenders and lending brokers. You might never have noticed because all of them use similar advertising to promote payday loans, personal loans, business loans, car loans and more. However, there is a difference between the two when it comes to get the best loans deal.
Direct Loan Lenders
Although the difference between a direct loan lender and a lending broker is minimal, direct lenders are usually licensed to operate in all 50 states, which allow them to manage all types of loans and attend the demands of their clients coast to coast. They also have interest rates, financing fees, terms of service, and guidelines that remain the same across the USA.
Loan Lending Brokers
On the other hand, lending brokers are often licensed in the state they are based in, or in a series of states depending on the scope of their operations. Brokers are usually employees at a lending company, but can offer loans on their own outside the business and oftentimes they work for a commission under several different lending companies. Rates, fees, and terms of service that brokers offer usually vary from one to another significantly.
Advantages and Disadvantages
In this case, both direct loan lenders and loan lending brokers offer you services that have pros and cons. When you go with a direct lender, you will probably pay less for loans that when you go with a broker, but the drawback is that direct lenders only offer the loans of their own lending company.
On the other hand, brokers can quote different deals from different companies and usually advertise by making the price or service comparison among different lending companies, which is usually an advantage. However, the drawback is that you may end up paying the highest interest rates or find that the deal is not as good as you thought at first.
Different Loans, Different Terms
Although, in most cases you will rarely see the difference between applying for loans with direct loan lenders and lending brokers, with the exception to the rule which could be the type of loan you are looking for which can make the difference between them more notorious.
An example of this could be mortgage brokers, because the length of the term for the loan and the interest rate can show evidence of the difference. In addition, some brokers may take their commission directly from your pocket, besides the income or sales commission they are receiving from a lending company.
Making the Right Decision
At the very end, the decision is up to you, but being aware that you can find direct loan lenders and lending brokers can help you to find the right deal when shopping around for loans. Do a research to find similar offers, get quotes from at least five lenders, compare prices and try to find some background information on the company or the broker to make sure you have chosen the right option. With the information you discover, you should be able to make the best educated decision.