Brokers may appear to be easier and more convenient than direct lenders when it comes to obtaining loans.Direct lenders will remove the need to deal with brokers and banks.
PaydayNow offers short term loans from direct lenders with many benefits, but also drawbacks.These are the things you need to know before applying for a loan from an online lender.This will help you to determine if a loan from these lenders would be suitable for your needs.
What’s a Direct Lender?
Direct lenders are lending companies or institutions that provide loans. This includes banks and private lending institutions.The name implies that the loan application is sent directly to the lender without intermediaries or brokers.These lenders can be either online or in-person institutions.
Direct lenders can fund your loan application.They may also use credit cards in certain cases.They already have staff who are experts at underwriting, closing, process, and compliance to ensure that your application is processed correctly.
Direct lending involves raising capital from investors that can be used to lend to borrowers.Direct lenders can use the capital to finance a loan, without having to broadcast it to the institutional market.
Direct Lender Vs. Loan Broker
There are many companies and individuals in the finance industry that can assist people with financing.These individuals can be either direct lenders or loan brokers.They are two different entities, but they each offer loan options to borrowers.
A loan broker is a person who acts as an intermediary or middleman by helping clients find the right lender to suit their needs and their ability to repay.They are not lenders, but professionals who deal with borrowers as well as lending institutions.
Lender brokers meet with clients to discuss their financial situation and needs.They gather all relevant documentation to determine how much a borrower can borrow.After they have found a lender that suits your needs, they will offer you a loan.They will also communicate the progress of the loan application between the lender and the borrower.
Direct lenders, on the other hand, are the ones who lend money directly to clients.Direct lending does not require an intermediary or middleman between the borrower, financial institution, and lender.They will evaluate all documents and update the borrower on the loan application.
The compensation is what makes a loan broker different from a direct lender.Lenders are paid commission to loan brokers.The commissions that loan brokers make might be higher for a loan they offer than one that you are able to afford.Direct lenders are paid through origination and application fees.
Direct Lender vs.Correspondent Lender
A correspondent lender can be a small lender who is part of a larger lender. They fund the loan under their own name, but then sell the loan to a direct lender who services it.These lenders are extensions of a larger direct lender.Additional fees may be charged by a correspondent lender for loan applications.
The direct lender is not an intermediary or middleman for a larger lender.There is no additional underwriting or payment of fees.Direct lenders approve and process the loan directly.A direct lender makes the transaction much easier than dealing with a lender through a broker.
Benefits of Dealing With Direct Lenders
Direct lenders offer a faster loan process.A direct lender can process your loan quicker, especially if you have in-house underwriting.Everything is handled in-house so everything can be done in one place.This means that updates to the loan application are always timely and accurate.
The loan’s flexibility is another advantage, especially for those with poor credit.Some banks require clients to have a certain credit score before they will lend money.Direct lenders will ensure that borrowers get the best terms to suit their financial needs.
Direct lenders will allow you to save money.Brokers will increase your costs as they charge extra fees.Direct lenders will, however, only charge processing fees and origination fees.
Direct lenders have one drawback: you must apply to each lender individually.Direct lenders do not have brokers that will collect your documents or assess your financial situation.
The approval of your application is another drawback.Direct lenders are responsible for their own underwriting and loan terms.If there are any problems with your application, the lender can deny you a loan.In this case, the lender will reject your loan application and you will need to apply again.
Direct lenders are lending companies or banks that directly fund loan applications without any intermediary or middleman.Direct lending is more cost-effective than dealing with intermediaries and offers greater flexibility than traditional methods of obtaining loans