What Is the Difference Between a Payday Broker and Lender

December 28, 2011 by  Filed under: Loans 

When you search for a payday loan, providers are often split into two separate categories: brokers and lenders. But what is the difference and which should you use if you’re looking to secure the best possible rates? In this article we’ll look to weigh up the relative qualities of each and explore what it is that they offer to borrowers.

Defining a Payday Loan Broker and a Lender

Lenders and brokers are two very different entities. One provides money to customers, the other simply facilitates the application process between borrowers and providers. As such, a broker is a single company that represents the interests of many lenders, who will each provide a decision and their own rates of interest for each application. A lender is simply a business that provides loans, either directly to customers or through a broker.

In this regard it is the same as many other industries, most notably insurance. Here you will find only a few companies that actually provide policies, but many others providing an intermediary service. This helps to increase competition and should ultimately result in a better deal for the customer.

In terms of payday loans, there are far more lenders than you would find in other industries. However, this isn’t to say that there aren’t an equally high number of brokers too. Which one you choose to use should depend on a number of factors:

Who Offers the Best Rates?

Brokers have a slight advantage over individual lenders as they have access to a wide array of quotes. This gives them the opportunity to help more people from a variety of financial backgrounds. However, they are also bound by the rates set by the companies they deal with. So this makes it essential for them to only deal with the very best lenders, otherwise they simply won’t be able to compete – all things being equal.

When it comes to lenders, these companies have the ability to set their own rates of interest and apply charges accordingly. Whilst lowering the APR might make their payday loans more desirable, it could also significantly increase their own financial risk. This is why there is often only a very slight disparity between the various advertised rates. Lenders need to look after their own interests as well as ensuring that they remain competitive. So there is a certain balancing act that they all have to perform.

For anybody seeking to get a payday loan, it is still worth carrying out your own rudimentary research before choosing either a broker or a lender. All will advertise their rates clearly and concisely on the company’s website, giving you the chance to calculate the costs at a glance. Remember though that you shouldn’t always take APR at face value. Most companies will provide a representative example of how much you will pay (usually something like £25 for every £100 borrowed), to give you a clearer indication.

Now whether you prefer dealing directly with a lender or are happy turning to a broker is largely going to come down to preference and availability. Whilst payday loans are generally accessible to all, there are some limitations. So if you think that you might be on the borderline with a number of lenders, a broker might be able to find a company that can help. Equally, if you don’t fancy filling in your details a number of times for each lender, you can often go to a broker and complete a single form to apply with numerous providers. Convenience shouldn’t be the only factor that you use, but it certainly can’t be overlooked either.

Vincent Rogers is a finance writer who writes for a number of finance businesses. For payday loans, he recommends Paydaypower.co.uk

Article Source:

Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!

You must be logged in to post a comment.

Prev Post:
Next Post: