Just at the point that the banks appear to have slammed their doors in the face of borrowers, the average person is more in need of credit than ever. The result is that more and more of us are finding that accessing credit means a dispiriting trawl through hundreds of lenders, hoping that someone, somewhere, will be kind enough to offer a loan.
So if, like many people, you find searching for a loan daunting, confusing and time consuming, you may have wondered about the growing number of loan broking services offering to do all this for you. And because it’s what we do, we thought it would be a nice idea to help uncover the facts about loan broking.
What are Loan Brokers?
Basically, loan brokers are a type of middle-man for matching people with lenders. By giving them your details, a loan broker will find you a lender who is most likely to lend to you. You can then apply for your loan.
Yet the industry itself suffers from an image problem. Mention bad credit loans, and you instantly think of a murky world of subprime lenders, loan sharks, and interest rates of 3000 per cent. Many loan brokers claims are attractive; no fees, guaranteed finance within seconds, and instant credit for anyone who applies.
But online forums include complaints from people who claim they’ve been ripped off or scammed, or want their money back, and warnings about loan brokers who are not providing a proper service are regularly publicised.
So is there any truth in the claims about loan brokers? Do they offer a good service, or are they simply exploiting people?
The personal loans industry is worth billions, so it’s easy to see how brokers could take advantage of people who need credit. But is this fair? The flip side is that some people argue they have received a good service, and that loan brokers have provided them with real help in solving their borrowing problems. So what is the truth?
Most borrowers would agree that having someone take the leg work out of applying for a loan is a good thing, especially for someone with poor credit. Using a loan broker can be a quick and simple way to finding finance that you will be accepted for. Yet there are also some companies out there who are ripping people off.
So to spot the companies who are only interested in getting their hands on your money and not helping you, it’s important to distinguish between the unscrupulous brokers who often claim to be able to deliver £10,000 to your door within hours, and the legitimate companies who provide a good service.
The majority of complaints surrounding loan brokers, are when customers are supposedly ‘guaranteed’ a loan, and then asked for immediate payment of a fee, to ‘release’ a loan, which doesn’t actually exist.
As a general rule of thumb, a broker can never guarantee a loan for an upfront fee. Actually being accepted for a loan will always be down to the lender. The broker’s job is to find you a lender who is most likely to lend to you, and therefore they simply can’t make these kind of promises. If they guarantee a loan in exchange for an upfront fee, then you may not get the service you are expecting.
So to be on the safe side, you should always ask the following questions:
Are they ‘guaranteeing’ you a loan?
Is the fee refundable if they do not find you a loan or you choose not to accept it?
Will there be any other fees added?
Is the loan dependent on paying for lots of insurance policies?
Are you able to easily cancel your application?
Finally, always check all information you have provided is correct, and truthful to get the best out of a broker. For example, you must make always sure your broker is aware of any other loan providers you have applied to, so that they don’t refer you to someone you have already tried.
As with any type of business, there will always be companies who don’t offer a good service. But by remaining vigilant, and taking care to avoid the pitfalls described in this article, a good loan broker is able to save you time, and money if you need a loan.
