Short Term Finance in the UK – Lender VS Broker
In this precarious economy getting a short term finance from the banks has become a nightmare. Life is getting more expensive, and our financial responsibilities remain the same. You need a place to turn to that will help you make ends meet and get emergency money when you need it. This is where short term finance help come in.
Short term finance is the solution when you need to borrow money for a short period of time. If you are looking to get one, you need to shop around for the right rates and fees. These are the solution for people with a good or fair credit history that needs to get it without collateral.
What is short term finance?
This type of credit is designed for people dealing with financial emergencies. It is supposed to tide you over until you get your paycheck at the end of the month. The rates and fees are a bit high so you must consider the time frame and only get them when it is really short term, like for a month or less. It is also important to pay them back as soon as possible. These are available online and through mobile phones and are perfect for those who needs one. These loans can be applied for at any time online and the money is deposited in your checking account within 24 hours.
Requirements for a short term finance
To get the loan, you will be asked to provide your personal information such as name, address, phone number and employment details. This information is filled into your application form.
In most cases, you should be employed for a minimum of 90 days and be over 18 years old. You should have a working phone, a home phone number and a working email address. You should also have a minimum income and the amount varies with lenders. If you source your income from disability benefits or social security there are lenders ready to provide you with credit, as well.
Once you apply you will be expected to provide a post-dated check giving the creditor your checking account number and your banks routing number. This will help them to deposit money in your account easily. You may be requested to send some information to them, like proof of income, proof of your account details and proof of your identity.
Advantages of these loans
This access is not only fast but it is secure so as to protect your personal data. It saves you the hassle of going to the physical address of the loaner. You don’t even have to go there to make the payment because it is directly withdrawn from your checking account when it is due. These loans provide reasonable fees as compared to the ones charged by credit card companies for a cash advance or bank credit.
Most of these lenders can give you for up to 700 pounds that you can pay back within a certain short period of time. You can access them online or through the mobile using modern mobile apps that are easy to use.
Consequences of late payments
There are some late fees charged for late payments that vary with each lender, and it is your duty to read the lender’s policy agreement to be aware of the charges to expect. These loans are readily available but can be a cause of great stress if you don’t adhere to the payment terms. Some lenders provide their clients with the option of postponing the period subject to certain conditions, which includes additional fees. Defaulting from paying such loans can lead to criminal charges in extreme cases.
Short term finance categories examples
- Weekly loans
Here, people can apply for loans for a couple of weeks mostly two week loans. The payment is tailor made to coincide with your next pay day.
- Monthly loans
This is a 30-day short term loan for people in need of a extension. Basically, the longer the payment period the higher the financial fees.
Look out for:
Ensure that your lender charges reasonable fees has affordable rates and fully discloses the terms to you. You can only do this by taking the time to compare the different short term finance available from different lenders. Read the application carefully to get a provider willing to provide you with the lowest financial rates and fees as compared to the rest.
Difference between short term finance lenders and brokers
Most of the Lenders provide brokers with variety of commission based discounts at a lower rate than the one they use for the advertising purposes. This allows brokers to market the product and get a commission from it. By getting clients through them, they spend less. The broker has to furnish all operation costs included in advertising the, getting the clients and completing any application needed.
Broker VS Lender
A broker is an individual whose job entails organizing short term finance between providers and applicants. They benefit from the transaction because they get a commission from each successful application.
The relationship between short term licensed lenders and short term licensed brokers
For example if a lender charges an interest rate of 5% on a loan to its borrowers, it has calculated this rate to be able to cover its operation costs and have a little profit on top with each application. The lender may only have to charge 4% interest to cover its overheads, and the remaining 1% is profit. Based on this situation the lender may offer a good commission to a broker where if the broker brings in clients in need of a money willing to pay more than 4% they get a certain percentage of it.
On the other hand if they bring in applicants willing to pay just 4% they don’t get a commission because this just covers the banks overheads with no remaining amount to pay the broker commissions. Based on the commission provided to brokers sometimes they are able to give at a cheaper rate than the main lending institutions while other times the lending institutions have a better deal. This can only be determined if the borrower takes time to shop around before they apply for the loan. This will help them to find the person providing the best rates whether it is a licensed lender or a licensed broker.
This is the difference between lenders and brokers. So, what are the advantages and disadvantages of using a licensed lender or a licensed broker?
Benefits of Licensed Brokers over Licensed Lenders
– Most brokers rarely represent a single lender. They normally represent several lending sources, and this gives their customers a wide array of choices.
– The fact that they are an intermediary for the licensed lender can postpone the time it takes to close your loan
– Licensed lenders are limited as to where they can lend out funds. This means if you are in an area that the broker is not licensed to give credit then you cannot use a broker regardless of how good a rate they offer you.
– Licensed brokers are limited to the guidelines provided by the licensed lender they are working for. This limits their options when it comes to satisfying a customer as they have to contact the licensed lender if they need to cut any corners to make a loan available to a client. This postpones the period that it takes to access the money from them making it easier to work with the licensed lenders in this case.
– To get a loan from a licensed broker you will be expected to pay the cost of the loan plus the broker’s fees. This makes it more expensive when accessed through a broker, as opposed to using the licensed lender.
In the end, it is preferable to use a licensed lender over a licensed broker. This is because they can offer you short term finance at the best rates because with them, there is no additional cost such as the brokerage fees charged by brokers. They can also fasten the lending process so that you get your money in the shortest amount of time possible.