Searching for a personal loan that is right for you can be a time-consuming and stressful process. A personal loan broker can help match you with a loan that best suits your personal financial circumstances and requirements, whatever they may be. To learn more about personal loan brokers, continue reading below.
What Is A Personal Loan Broker?
A personal loan broker is an intermediary that connects a borrower and a lender to complete a financing transaction. In a way, a personal loan broker acts like a service provider because they seek out a lender option that best suits their client’s needs and qualifications. There are many types of brokers that operate in different fields, let’s take a look at some of the more common ones below.
Real Estate Broker
A real estate broker represents buyers and sellers of real property. Typical duties include listing properties on behalf of the seller, showing properties to potential buyers and guiding clients through the documentation, and the legal and offer processes. They may work independently or as part of multiple real estate agents employed under a single brokerage.
Investment Broker
Securities exchanges require orders to be placed by members of that exchange. Brokers help to facilitate the trades of individuals and investors that are part of an exchange. As compensation for acting as an intermediary between investors and securities exchanges, investment brokers are typically compensated through commissions or fees, but may also be compensated directly by the exchange.
Loan Broker
Loan brokers are a third party that acts as an intermediary between borrowers and lenders. They are sometimes referred to as a lender connection or matching service and they typically operate online.
How Can A Personal Loan Broker Help Me?
Personal loan brokers help their clients navigate the different loan options provided by their lending network. Borrowers will only need to submit their personal and financial information once to the broker rather than have to fill out multiple forms for various lenders.
This streamlines the tedious process as borrowers can also rely on their broker to do the research required to find a loan that best fits their needs. Using a broker to source your loan can also help you save money because it allows you to select the best deal from many different quotes provided by lenders.
Personal Loan Brokers vs. Direct Lenders
| Personal Loan Broker | Direct Lenders | |
| Who Funds The Money | Personal loan brokers do not lend the money, they simply connect you with a lender who is willing to lend to you. | Direct lenders are the funder. |
| Application Process | With personal loan brokers, you simply have to fill out one application to be connected to multiple lenders. | With direct lenders, you have to individually apply to each lender. |
| Fees | Most personal loan brokers are free to use. However, these fees may simply be forwarded to the lender, who will charge you a loan origination fee. | Direct lenders often charge numerous fees including administration fees, loan origination fees, and loan application fees. |
Borrow Up To $50,000
5 Steps On How To Choose A Good Personal Loan Broker
Choosing a good personal loan broker is important as it can affect the cost and terms of your personal loan. Here are 5 steps on how to choose a good one.
Step 1 – Check The Size Of Their Lender Network
A personal loan broker will do the fieldwork for you which means it’s important to carefully select one. When searching for a personal loan broker, there are several factors to consider to ensure you find one that suits your needs, including the size of their network. You will want to choose a loan broker that has a wide lender network. The more lenders your broker receives quotes from, the better chance you have of getting a good deal.
Step 2 – What Type Of Loan And Interest Do They Offer
Check that the broker is offering the type of loan and interest type that you are looking for. Most brokers only offer fixed interest loans.
Step 3 – Understand The Loan Conditions
Make sure that you are familiar with the conditions of the loans that your broker is offering. For example, if you think you may pay off the debt early, then you will want to verify that you can do so without incurring any additional costs or penalties.
Step 4 – How Fast Is Their Funding Time
Some brokers will work faster than others to fund your loan upon approval. Generally, online-based brokers will approve loans faster than those that operate under traditional structures, such as major banks.
Step 5 – Do They Have Good Customer service
Make sure that you are comfortable with the level of customer service that the broker provides because you may be dealing with them for the entire duration of your loan.
Pros And Cons Of A Personal Loan Broker
Pros
- Saves Time – Personal loan brokers will do the leg work for you. They will search, negotiate and find a deal that best works for you and your financial situation. You won’t have to worry about whether you meet the lender’s requirements or if you missed any documents.
- It’s Free – In most cases, personal loan brokers do not charge anything for their services. They typically get paid through a commission by the lender you decide to borrow from.
- Multiple Offers – One of the major perks of a personal loan broker is the multiple offers they can find for you. With a single application, your personal loan broker can offer you multiple loan offers from different lenders that you can choose from.
- Works With Any Credit – Whether you have bad credit or good credit, a personal loan broker can help connect you with a lender who is willing to lend to you. Though you can qualify for the best rates with a good credit score. As such, it’s best to check your credit score before working with a loan broker.
Cons
- Commissions – Many personal loan brokers earn their revenue through commissions. This may result in biased recommendations, as the broker may push lenders that offer them a higher commission.
- Small Lender Network – If the personal loan broker you’re working with has a small lender network, it can lead to poor loan offers. When choosing a personal loan broker, ensure they have a large network of lenders.
How Much Does It Cost To Work With A Personal Loan Broker?
Personal loan brokers are typically compensated through commissions which are paid by the lenders that they recommend borrowers to. Borrowers do not need to pay the personal loan broker. The borrower will only be responsible for administrative or recurring fees charged by the lender.
Watch Out For Scammers
Scammers are becoming increasingly creative with their fraudulent attempts so make sure that you do your due diligence to verify the validity of your loan broker. Most personal loan brokers will not charge you a fee as they are compensated through commissions from the lenders they work with. Other potential red flags include unsecured websites or broker companies that do not have a legitimate address or sufficient contact information.
Personal Loan Broker FAQs
Is it better to use a personal loan broker or find a lender myself?
Do personal loan brokers work on commission?
Are there any requirements to work with a personal loan broker?
Looking For The Right Loan?
If you’re in the market for a loan but are interested in doing the research yourself, Loans Canada can help. Our online loan comparison platform can help you compare loans and choose between multiple offers, all from the comfort of your home.
