Though a loan broker may seem like a stress-free solution to borrowing money, there is a possibility that you could be borrowing more. With hidden fees and some not being regulated by the FCA, this could lead to you spending considerably more in the long term due to lack of regulation. In this article, we will be looking into some of the reasons that you should avoid using a loan broker in the long term.
What Are Loan Brokers?
Credit brokers are firms that are used to help people find the right loan for them. There are different types of loan brokers operating in payday loans and other loan options. Although they may seem practical at first, many hidden charges may cause issues when it comes to repaying the loan. However, there are loan types for those with poor credit like bad credit and guarantor loans that cater to specific lending types.
Check They Are Authorised By The FCA
One of the biggest elements to consider when it comes to direct lenders and brokers in the financial conduct authority. When borrowing from a broker, it can be difficult to tell whether or not the lender is FCA authorized. However, by going directly to the lender rather than through a broker, you are able to ensure that everything is authorized by the FCA meaning that everything is fair and just and monitored. This, therefore, means that there are no hidden charges and all information is disclosed when applying for the loan, making it easily repayable as a result. In addition to this, there are several credit brokers out there that are operating illegally.
There Could Be Brokers Fees In addition to the regulation of the FCA, there is also the option of brokers fees. By doing directly to the lender you are removing these fees that they make from your sale. This, therefore, means that you are likely to get a better deal by going direct. In addition to this, some credit brokers would send clients personal information to other credit brokers without permission. This is a gross violation of GDPR and can lead to you being targeted by other lenders without your knowledge.
You Could Be Missing Out on Lower APR
One of the biggest reasons to avoid brokers and go direct is to get the lowest APR possible. When using a broker, they may not always be providing you with the best deal. If you decide to use a credit broker but are looking to cancel it and ask for your money back, there is a 14-day cancellation window with the distance marketing rules. This rule states that a broker must refund all your fees from the last 30 days. However, this will not apply to Nonregulated FCA credit brokers, therefore it is important to be aware of this beforehand.
With this in mind, there are several reasons why using a direct lender is far more beneficial than using a broker, making this a popular choice for many of them that are looking to get themselves out of financial difficulty. Which will you be choosing?
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