But why would you use a broker to find a loan? Let’s take a look.
What’s out there?
As with mortgages, there are a lot of loans out there to choose from. Each offers its own benefits and disadvantages, and while you might be eligible for some, you probably won’t be for all of them.
The thing is, each application for credit you make leaves a mark on your credit history that lenders can see. If you apply for a loan and get turned down, this will leave a mark. If you keep applying for loans and being turned down, this will leave several marks – and lots of marks appearing close together can make it appear as though you’re desperate to borrow. This can be a red flag to future lenders, who might then turn you down based on this.
"A broker can narrow down your search for a loan."
A broker can help you narrow down the loans out there to the ones that you’re eligible for. This isn’t a guarantee that your application will be accepted – but it can at least give you a clue that the loan provider lends to borrowers like you. This may help you keep those marks on your credit history to a minimum.
Brokers can also help you choose between different types of loan depending on your needs. For example, you may have been considering personal loans, but your broker could believe that you’ll get a better deal with a homeowner loan. They can fill you in on the advantages and disadvantages of different products.
Using a broker may also help make your search that bit simpler. A broker works a little bit like a price comparison website in that they can suggest products that suit your needs.
But there are some lenders and products that are not available on price comparison sites but that can be accessed through the broker exclusively. There are also products that are only available if you go directly to the lender – so it’s worth doing your research to see what’s out there.
What about a mortgage?
As we mentioned earlier, mortgage brokers can search the market on your behalf to find a product that meets your needs. While there are some mortgages that are only available directly from a lender, others may be offered through brokers exclusively.
If you’re turned down for the mortgage you want, a broker can search the market for you again to find another mortgage that offers what you need. This may be faster than you starting your own search again from scratch – and time isn’t always on your side during a property purchase.
As we said, you could search for a loan yourself. While there are some lenders that work exclusively with brokers, there are many you can apply to direct. It all depends on what works for you.
Brokers can help you move your search along and recommend products that come closest to meeting your needs. It’s a bit like going to the shoe shop and giving the assistant your size and budget and then picking from the selection they choose.
However, you might feel more comfortable using a comparison site and contacting lenders direct. We would recommend always shopping around rather than going straight to your current bank or lender – when you do this, you close yourself off to most of the market and could miss out on a more suitable deal.
Disclaimer: All information and links are correct at the time of publishing.