As a consequence of the Internet, it is now possible to communicate with direct lenders and cut out the middleman. While credit brokers offer a degree of advice and comfort to many, they can also be seen as an additional layer of cost. So, how do you apply for loans with direct lenders?
There is no doubt that the Internet has changed the UK financial services industry, providing more transparency and availability to parties such as direct lenders.
This potential removal of a layer of cost needs to be considered in relation to the value of advice given by credit brokers.
What Are the Benefits of Dealing With Direct Lenders?
As we touched on above, one of the main benefits in dealing with direct lenders is the fact that you’re able to remove a layer of cost. If times are hard and you have hit financial troubles, then any savings would be gratefully welcomed.
We now have an array of loan calculators, credit reference reports and numerous articles covering the best “loans for those with bad credit ratings” online and available 24/7. So, you could argue that the information is there to allow you to find the best deal for you.
In reality, not all of the “best loan deals” will be available to everybody as lenders would need to consider an individual’s circumstances and their financial status.
There is no such thing as a one size fits all solution when it comes to loans for those with very bad credit ratings. What may seem like relatively straightforward online research might quickly become more complex and more time-consuming.
Where does it end?
How Do I Compare and Contrast Interest Rates and APR?
Once you begin to research the loan market for those with very bad credit ratings, you will come across headline interest rates and APRs. It will probably become apparent fairly quickly that the APR is higher than the headline interest rate.
As a consequence, many of us tend to focus on the headline interest rate, often ignoring the APR. Big mistake!
The APR will take into account not only the loan amount but also any additional charges such as setup fees, etc. These will be added to the original loan figure and used to calculate the “real” interest charge on your loan.
In future, forget the headline interest rate and focus more on the APR. This gives a true picture of the real cost, and you will find that many loans have an array of additional costs, charges and fees going forward. These will all need to be repaid, and as they are generally added to the initial loan, they will also attract interest.
Should I Take Financial Advice?
When you consider there are in excess of 300 companies operating in the UK lending market, there is certainly much to consider. While dealing directly with lenders may well have some benefits with regards to interest rates and charges, what value do you put on financial advice?
There is an argument that those seeking specialist funding, i.e. those with very bad credit ratings, would actually benefit more from the services provided by credit brokers.
These are individuals with strong contacts in the marketplace; they are fully aware of the latest offers and may even be able to suggest alternatives measures.
If you don’t fully appreciate how the market works, interest rates and APRs, charges and penalties, how can you negotiate the best deal yourself?
Do Brokers Receive a Commission From Lenders?
One of the main problems for credit brokers in the past was the issue of transparency and commissions received. In many cases, there was distrust between borrowers and brokers amid concerns of conflicts of interest and behind-the-scenes commission payments.
The situation has changed dramatically over the years, and all income streams and relationships between brokers and lenders have to be disclosed.
This enhanced transparency has given borrowers more confidence whether the commission is paid directly from the lender, from the borrower or a mixture of the two. Everybody knows where they stand!
How Do I Secure the Best Loan Deal?
In reality, whether you have a good credit history or in this case a very bad credit history, there are benefits to doing your own online research and then using credit brokers.
There is nothing wrong in making yourself aware of the inner workings of the sector, calculations and different types of interest. The problem is that you won’t have direct relations with any lenders, you wouldn’t be able to scour the market for the best deal, and unlike a broker, the opportunities for negotiation may be limited, to say the least.
The ability to negotiate a reduction in interest rates, often above and beyond 40%, and trim charges/fees going forward, can make a huge difference.
While the benefits may be greater with long-term loans, there are still benefits to be had for those in need of short-term finance.
Don’t Forget Affordability
Amidst talk of cost savings, dealing directly with lenders, the value of broken advice and negotiations, it is easy to forget the basics of applying for a loan – affordability.
Whether your income comes from employment, benefits or any other income stream, as long as you can prove you can afford loan repayments, there is no reason why you won’t be successful.
Obviously, those deemed to be high risk will attract high-interest rates, but if your situation was to improve, then you may be able to refinance on lower rates further down the line.
While the idea of dealing directly with lenders certainly has appeal with regards to potential cost savings, this has to be balanced with the value of professional financial advice.
Even though the Internet has changed the way the financial services industry operates, it can still be difficult to scour the market on your own for the best deals.
There’s also the opportunity for brokers to negotiate further enhancements and even access deals and promotions which are not always in the public domain.
This creates a very delicate balancing act for borrowers, direct visible cost savings and the value of expert advice and behind-the-scenes negotiations.
How Can Flexy Loans Help?
Here at Flexy Loans, we have partnered with some of the UK’s leading Lenders.
They have already helped thousands of people get loans already, and they can do the same for you.
Choosing a loan broker like us (we don’t charge any fees) means our application process matches you with the best loan available to you. All lenders we recommend are regulated by the FCA, which gives you an additional layer of protection.