How do you get a loan through a broker? Are all brokers the same? Is it really better to get a loan through a broker than it is to apply directly to a lender?
Looking to get a loan but want to go through a broker?
Here’s CashLady’s guide on everything you need to know on how to get a loan through a broker.
Decide the type of loan you want to go for
There are lots of different types of loans out there. Some lenders work with brokers and others don’t.
Banks, building societies, and crowdfunding sites (like Zopa) don’t generally work with brokers. They generally like to make loans of £2,000 or (lots) more over up to 8 years. With these types of loans, you have to apply directly to the lenders.
Other types of loans like payday loans, short-term credit loans, guarantor loans, and logbook loans do use brokers.
Companies offering payday loans and short-term loans like to lend between £80 and £2,000 over a period of one month to twelve months. Guarantor loan companies and logbook loan companies tend to offer £2,000 or more over periods lasting one year to five years.
Once you’ve decided on the type of loan you want to take out, then start searching for a broker who specialises in them.
Find brokers who specialise in those types of loans
You can find lots of brokers offering the type of loan you want to take out online with a simple search – like “payday loan broker”.
When we wrote this article, CashLady, a Financial Conduct Authority-approved broker, appears at number 1 on Google listings when people search for “payday loan broker”.
That’s because we’ve been around for a long time, we have very high customer satisfaction ratings, and our website is full of useful information for people looking to borrow money from short-term finance and payday loan providers.
How many lenders do they broker for?
Every company that makes loans in the UK has to be approved by the Financial Conduct Authority. Getting past their rigorous tests is difficult. When they did their last round of testing back in 2016, lots of companies either dropped out of the market because they didn’t want to go through the tests or they ended up failing them.
Because it’s so hard to become approved by the Financial Conduct Authority, lenders are generally very careful about the types of broker they partner with. They want to know how the broker company is run, who manages it, how long they’ve been trading, and lots more.
That’s why some brokers only represent one or two lenders – it’s because they’ve not been around long enough to gain the trust of all the lenders in the industry.
Why that’s important for you is down to two big reasons –
1) Lenders have “profiles”. A profile is a description of the type of person they feel most comfortable lending to. If there are fewer lenders, the chance of finding one who likes your profile is smaller. And,
2) Even if there are lenders who like your profile, the broker cannot create decent competition for your loan. For example, if one broker finds two lenders who like your profile and another broker finds six or seven, who do you think you’ll get the better deal from?
Get a loan through a broker. Check the broker’s small print
There are two types of brokers – one type receives a thank you payment from the lender every time they match a borrower with the right profile and the borrower takes out the loan. The other type charges you a success fee for finding you a loan.
The broker which receives a thank you payment from the lender doesn’t charge you a fee.
Success fees that are charged to you by a broker may add substantially to the cost of your loan.
Please choose your broker carefully as the goal must be to get you the amount of money you need at the lowest possible cost to you.
Get a loan through a broker. Make your application
When you apply for a loan, you’ll be asked for information about yourself. It’s that which the broker will then use to decide which lender is going to be most likely to want to take you as their newest customer. That information generally includes:
• Your name
• Your mobile telephone number
• Your address and whether you have a mortgage or you’re currently renting
• Your last three years’ address history
• How much you earn every month (usually they look for a minimum of £500)
• The name of your employer
• What your monthly outgoings are like (rates, gas, electricity, mobile phone, council tax, Sky, and so on).
Once that’s submitted, your broker will pair you to the right lenders. Once they have received a decision-in-principle, they’ll then match you with the best offer they’ve received.
Get a loan through a broker. Wait for the decision
At this point, the selected lender will perform a full credit search. They’ll then combine that information together with what you filled out on the broker’s site and come back with one of three answers:
• Qualified Yes
If you get a “qualified yes”, the lender will want more information. They’ll usually ask the broker to collect it for them however it’s not uncommon for the lender to get in touch directly with you.
Once they have the additional information, they will then give you a definite “yes” or “no.”
Get a loan through a broker. Agree to your loan and collect the money
Once you have your “yes”, you’ll be asked to agree to the terms and conditions of the loan, providing your digital signature.
When you’ve done that, your money will then be transferred to your bank account within an agreed timescale.