Can You Trust Direct Lenders? 5 Things to Keep in Mind When Borrowing Directly

Finance

In this challenging economy, most people find themselves in need of some form of credit. Unfortunately, when borrowing demands are high, predatory lending practices also tend to increase.

Whether you’re a first-time borrower or a seasoned one, it’s always a good idea to scout your credit options so you can make a better decision. Be it for short-term needs or something more substantial like a mortgage, it’s essential to know who you’re borrowing from.

Direct lenders have become an increasingly popular option for those looking for quick, straightforward loans. Unlike their traditional lending counterparts, these lenders cut out the middlemen from the loan application process. This allows them to disburse loans quickly and also offers more flexibility.

While this is advantageous, there are additional factors you need to consider before signing on the dotted line. By researching and asking the right questions, you can avoid falling victim to scams and choose a lender that best suits your needs.

In this article, we’ll explore some of the factors you’ll need to bear in mind when considering a loan from a direct lender.

1. Reviewing Your Financials Before Borrowing

Borrowing is risky, regardless of whether you’re considering a direct lender or a traditional lending institution. That’s why it’s important to review your finances before considering applying for a loan. This review will help you better prepare for the additional responsibility, ensuring you can make the repayments on time.

Reviewing your finances is always a good way to assess your capacity to take on debt. A loan application alone can show up on your credit report, as lenders often do hard credit checks. Additionally, taking a loan can hurt your credit score if you aren’t sufficiently prepared with a budget to tackle repayments.

2. Low Interest Rates

Traditional lenders often issue loans at high interest rates, making them inaccessible for people with bad credit or a thin credit file. However, direct lenders are an attractive option for those who need bad credit loans. This is because direct lenders offer flexible loan options and are often known to customise their offerings. This includes providing lower interest rates and flexible terms for loan repayment as well as occasionally extending the loan time.

Direct lenders can offer low interest rates because they customise their loan offerings to suit your specific financial needs. Unlike traditional lenders that refer to your credit history, direct lenders use a combination of factors to assess your ability to repay. This also ensures you don’t borrow more than you need and can manage your debt reasonably.

3. Speedy Disbursal

Banks and other traditional lenders often have rigid operational hierarchies in place, making the disbursal of funds a stressful and time-consuming process. This is unsuitable for those looking for funds in times of emergencies. 

Direct lenders don’t deal with middlemen or have an organisational hierarchy to follow. Therefore, they’re in a better position to cater to your immediate fund needs and avoid inordinate delays.

Direct lenders are well-known for their quick fund disbursals and hassle-free loan applications. While traditional lenders will carry out hard credit checks, which take additional time, direct lenders use a different set of metrics based on your existing financial health. These lenders can sometimes also issue loans within the same day as your application or on the next day. 

4. Repayment Terms and Conditions

Reading a loan document can be cumbersome; technical language and complex terminology typically associated with legal documents can tire you faster than the loan application process. Banks and other lenders sometimes use this as a guise for slipping in hidden fees under various names like transaction fees, late payment fees, origination fees, etc.

Direct lenders, on the other hand, offer transparent terms and conditions for loan repayment so that you don’t get confused. They’re also more likely to give you better clarity regarding your repayment options. This will give you peace of mind, as you’ll know exactly what you’re signing up for when applying for a loan. 

5. Checking Your Lender’s Credibility

Credible lenders and lending institutions will always have their details included in the FCA database and be authorised to lend. Therefore, your first step in checking your lender’s credibility is to find them on the FCA register. As most direct lenders have online platforms for inclusive and accessible credit options, it’s a good idea to look for a strong online presence.

You can also consider looking for customer testimonials online, as they’re worth their weight in gold when it comes to lending and borrowing. Positive reviews are a sign of high customer satisfaction and lender reliability, making them a good borrowing choice. You should also be wary of lenders who are being extra accommodating, offering lower than reasonable interest rates, or have no online presence.

Conclusion

Taking a loan doesn’t need to be stressful. By doing your due diligence and researching your loan requirements, you’ll be saving yourself a tonne of hassle. 

While direct lenders can offer competitive loan options compared to traditional lenders, you should always choose wisely. The right lender can help you manage your finances and loan repayments better. We hope this article will help you discern the right loan and lender for your financial needs.