Should you get a personal loan through a broker?
Go direct or go to a broker. Those are your two basic options when you’re looking for a loan. But what’s the difference, and why does it matter?
WHAT DOES "GOING DIRECT" MEAN?
‘Going direct’ is the traditional way of getting a loan. You go to the bank, in person or online, and you apply to them and them alone. You speak to a bank manager or a loan expert, and they will give you your options. It doesn’t matter if you’re going through a bank, a non-bank lender, a credit union, or any other kind of finance company. If you are getting the loan straight from a specific company, you are going direct.
WHAT DOES GOING THROUGH A BROKER MEAN?
Going through a broker means that you are speaking to a loan advisor, consultant or broker. These are different from direct lenders. They don’t offer you a loan themselves. Instead, they go to lots of different banks, non-banks and other lenders to find you a suitable deal. They dig through the various options on the market and come back to you with an offer. Basically, they speak to the ‘direct’ lender on your behalf.
WHAT ARE THE BENEFITS OF GOING THROUGH A BROKER?
There are several advantages to going through a finance broker:
- A broker saves you time and effort. Instead of going to different lenders and negotiating the best deal yourself, a broker does that for you.
- You don’t usually pay them for the service. They get a commission from the lender that you choose to go with instead.
- Brokers get you the best product. They know the latest and greatest offers out there and they already have professional relationships with the lenders. That often gets you a better deal. It might be a lower interest rate, a special facility on your loan, or cashback and other extras.
- Brokers can help self-employed or bad credit loans. If you’re self-employed, have bad credit or otherwise have trouble going direct, a broker can more easily find the best loan for you.
A broker can get you a better deal, with less effort from you, and usually for free. The only downside is that some lenders don’t work with brokers. You might cut yourself out of a small part of the market. But the pros still usually outweigh the cons.
CHOOSING A FINANCE BROKER
Let’s say you’re sold on the idea of a broker. How do you choose one?
Your best bet is to ask for recommendations. Lots of people use brokers, and you're sure to have at least one friend or family member that has used one. Personal recommendations are worth a lot here. Brokers often compete on providing a better experience.
If you find a broker you like, check to see what lenders they already have relationships with. Ideally, you’ll want a broker that’s as independent as possible. If they have too many existing relationships, they may only work with their favourite lenders. Remember, brokers must declare any relationships they have by law, so don’t be afraid to ask.
If you’ve got a good relationship with your lender or you know what you want, go direct. If you want to explore your options and potentially find a better deal, go through a broker.