Now and again, emergency expenses or bills pop up that leave our finances stretched for the month: the car breaks down, the roof needs fixing, the house is flooded. In many instances, problems like these need to be solved right away before further damage can occur but if you do not have the money, resolving them can be difficult.
One option is to apply for a short-term loan. A short-term loan can help you to manage any financial shortfall and take the pressure off until you are paid at the end of the month.
However, when it comes to applying for credit, you need to do your homework.
Applying for your first loan can be a daunting process, but it doesn’t need to be. First, evaluate whether or not you are in a position to afford monthly loan repayments. Next, you need to decide between using a short-term loans direct lender or broker.To find out what else you should consider before applying for a short-term payday loan, download our eBook now. It's free!
Short-term loans direct lenders and brokers both function differently and on that basis, you need to understand how each option works if you are to make an informed decision.
What’s the difference between a lender and a broker?
When it comes to borrowing money, the first thing you want to do is to use a price comparison website (PCW) to compare loans. Websites such as All The Lenders, for example, offer impartial loan advice and advertise short-term loans by direct lenders. Other websites will advertise both short-term loans by direct lenders and brokers – but it is up to you to do your research.
With lenders, you can get an immediate decision on your eligibility for a loan and – subject to an affordability assessment – the funds can be available within minutes.
Lenders keep your information confidential, never charge any upfront fees for applying, and conduct a thorough, comprehensive search of your credit history to determine your suitability (this process is only done once – leaving a lighter footprint on your credit file). All of this comes as a result of the regulation introduced by the Financial Conduct Authority in 2015 to make borrowing fairer and protect customers.
However, do bear in mind that if you are declined by a lender and choose to apply again within a short period of time, there’s a risk that you could be damaging your credit report and potentially wasting your time, only to get rejected again.
Brokers, on the other hand, will take your details via an application and then send your details to a panel of lenders via what is called a “ping tree” system. Ping trees allow groups of lenders to bid on loan applications within their target market in real-time – and the highest bidders get first preference. Lenders set the parameters of what they are looking for in a potential customer – and customers are picked up by lenders who are best able to finance them. Once a lender has accepted your application, you will be redirected to their website to complete it.
It is important to bear in mind however, that when you apply for a short-term payday loan via a broker, they may approach several different lenders, all of whom could conduct hard searches on your credit history. This activity can leave multiple footprints and be damaging to your credit rating.
Of course, brokers work well for people who want to compare and contrast loans but might not have the time or expertise to find the right loan themselves. Brokers are effectively the “middle man” between yourself and a lender – but if you are leaning towards a short-term loan from direct lender, you will want to conduct your own research.
Making the right decision
Now that you have familiarised yourself with short-term loans direct lenders and brokers, you are a step closer to successfully taking out a short-term payday loan. But there are still things to address before applying.
To find out what else to consider before applying for a short-term payday loan, click below to download our eBook.