Should I use a loans broker?

Whether you’re seeking a loan for home improvements, a new car, to consolidate debts or for any other reason, your top priority will likely be getting the best deal possible. But how can you make sure of that? You can of course compare loans yourself, but sometimes seeking the expertise of a broker can be invaluable. Here we take a closer look at whether you should use a loans broker, and what you can expect from their services.  

A loans broker – otherwise known as a credit broker – will match your funding needs with the lender and product to suit. They’ll essentially do all the hard work for you by scouring their network of lender contacts and comparing the different loans available, and may even have access to exclusive deals that you won’t be able to find anywhere else.

A broker can be particularly useful if you’ve got complex funding needs, if you’re seeking a specialist kind of loan or if your circumstances mean it’ll be difficult to find a loan yourself (for example, if you’ve got bad credit you may not be approved by mainstream lenders). Ultimately, they can help you find the right loan for your unique requirements – and crucially, at the lowest rate possible.

A broker differs from a lender in that they don’t loan you the money themselves – they simply put you in touch with the people who can. Given that many work with a wide range of lenders they’ll also have access to many more products than if you went to a lender individually, increasing the chances of finding the loan to suit.

Brokers have the added advantage that they can often help you navigate the application process, and could even help you decide which kind of loan would be best for your requirements. They’ll typically be able to offer a wider level of support and can help you work out how much you can borrow, and may even have tools that can help determine your eligibility with different lenders.

This entirely depends on your personal preference, circumstances and ability to hunt out the best deals yourself. If you’re comfortable comparing loans and are confident that you’ll be able to find the best rate, then you could always head directly to a lender. This may be particularly the case if you can access loyalty rates from your current banking provider, for example.

However, if you want to have a specialist take a look at all the options available for you, particularly if you need a more niche product, it may be best to head to a broker instead.

Remember that brokers don’t technically provide loans themselves; rather, they help you find the right loan for your circumstances. Many specialise in different areas, too, so if you wanted a personal loan you’d likely need to speak to a different broker than if you were searching for a bridging loan, for example. That said, some can offer a broader remit, offering access to a wide range of options.

It can be a lot more difficult to secure a loan if you’ve got a bad credit history, simply because you’ll be viewed as more of a credit risk, and lenders will be less confident that they’ll get their money back. Some will be reluctant to lend to you at all, while others will only consider lending at higher interest rates.

This is where a broker can really come into their own. They’ll know the lenders who are more likely to accept an application from someone with bad credit, and will be able to use that knowledge to get you the best rate possible.

There are several questions you’ll want to ask a potential loans broker before making your decision, including:

All loan and credit brokers should be fully authorised and regulated by the Financial Conduct Authority (FCA), the UK’s financial regulator. This will tell you that the broker you’re dealing with is legitimate, so make sure to ask to see details of this, or search for it yourself on the Financial Services Register. If they can’t confirm that they’re authorised, or you can’t find the company on the register, steer clear.

Any broker should have the necessary qualifications to offer this kind of service and should ideally have plenty of experience, though bear in mind that some will specialise in certain areas of funding, while others will be more generalist in nature. That said, if you’re looking for a particularly complex form of finance, experience can be invaluable.

There’s nothing worse than having unsolicited communications from third parties, so make sure that the broker you’re dealing with won’t pass on your details to anyone else. If it turns out they did, you can complain.

Taking on debt of any kind can potentially impact your credit score, so make sure to discuss this with your broker. This is particularly the case if you’ve already got bad credit, as you don’t want to jeopardise it even further.

This will likely be one of your key concerns, and not all brokers will have the same answer. Some will charge a direct fee, while others will earn a commission from the lender they pair you with and so will offer you their services free of charge. If it’s the former, make sure you agree to it; brokers can only charge a fee if they’ve provided you with written details, and if you’ve agreed to it in writing.

Brokers aren’t able to provide advice as such; instead, they offer a kind of matching service to pair you up with the right funding solution for your needs. They can still provide plenty of information and can help you weigh up the options,  but if you’re after more in the way of targeted financial advice, you may want to speak to an independent financial adviser as well.