Applying for a loan can be a stressful process. With multiple lenders and a vast array of products to choose from, it can be hard to know which is best for you and your situation.
If you’re struggling to find the right loan or mortgage, or think your financial situation might make you a less than attractive prospect for a lender, a loan broker might be the best option.
What is a loan broker?
A loan broker is an intermediary who gathers all the relevant information and approaches different lenders on your behalf. While going to a lender directly might bring about just one offer of finance, a loan broker can seek out all your options, so you can better see which is best for you. Loan brokers may charge you a service fee or receive commission from the lender for bringing your custom in, so make sure you check how payment works when you first engage them. You’ll also want to make sure that they’re authorised and regulated by the Financial Conduct Authority (FCA). You can do this by searching for an FCA-approved loan broker on the Financial Services Register.
A loan broker is legally required to tell you that they are a broker, so there’s no confusion if you were considering going directly to a lender.
If you choose to go with a broker, make sure you do some research into the kind of loans you’re looking for before you meet with them. This planning will help you form an idea of whether what the broker is offering you is a good deal or not.
What are the benefits of using a mortgage broker?
When you’re looking for a mortgage, there are lots of things to consider, from the length of time you’ll pay your mortgage back and the type of mortgage you choose, to early repayment fees and the raft of mortgage conditions. While it’s relatively easy to find these details online, comparing the pros and cons of each product can be time consuming – and confusing – especially when you can’t see the small print.
One of the main benefits of using a mortgage broker is that they know the market and are best placed to advise you on the best products for your needs, taking a lot of the legwork away. They also understand what different lenders expect, so can provide guidance on whether or not they’re likely to lend to you before you make an application, based on your own individual circumstances, which can be beneficial for your credit score. A mortgage broker should be able to explain everything to you in clear terms so you know exactly what you’re getting with each mortgage.
Another benefit of using a mortgage broker is the exclusive deals they can offer. Brokers often have access to products that might not be available on the open market, as some lenders only deal with them. You might also find your broker offers a more complete service, finding products like home and life insurance to complement the mortgage they’re arranging for you. This way you can tick a few jobs off your to-do list in one go.
Should I use a broker or a lender?
Whether you go direct to the lender or use a broker to shop around for loans, the choice is yours. While brokers can save you time and bring some valuable expertise to the table, there could be additional costs in the short term. Their existing relationships with particular lenders might mean they’re not impartial, even if the FCA says they should be.
However, if your circumstances are complicated – those with a poor credit history for example – enlisting the help of an expert to find lenders willing to work with you can be invaluable. If you’re new to borrowing and need some help understanding all the different loan types and conditions, then a broker could be your new best friend. Make sure you choose a loan broker accredited by the FCA and be clear on what they’re getting out of the arrangement before you start. This will ensure you really are getting the best deal for you.
Should you have time and your financial circumstances are fairly straightforward, you may find you can get a good deal direct from the lender. So, always do your homework before you approach a broker for their help.
Want to know more about loan brokers? Check out the Norton Finance FAQs page for more information.