Bad Credit Loans from a Lender or a Broker – Which is Better?

Bad credit loans and short-term loans are no different. They rather come under the latter. In other words, all small loans taken out despite a bad credit rating are known as bad credit loans. Before you fill in the application form, you must think about whether you should take out bad credit loans from a lender or from a broker.

However, they have some distinct features compared to other small loans. For instance, unlike payday loans, these loans can be used to fund both unforeseen and planned expenses.

Most borrowers apply for these loans for emergencies like a tumble dryer stops working, a laptop needing immediate repair, money for medical reasons, and the like.

Since these loans carry a slightly higher interest rate, it makes sense to take out these loans to fund unforeseen expenses you cannot afford to put off to meet them instead of funding wedding expenses.

These are also known as personal loans with a bad credit rating as they are not subject to collateral. Though you can use these loans for planned expenses as well, they have been designed to aim at unforeseen funding expenses.

This is why they are processed as soon as possible and hence also known as short term loans in Ireland.

Should you take out Bad Credit Loans from a Lender or a Broker?

If you need a bad credit loan, you must think of which option would be better for you – a direct lender or a broker. You can apply for a loan from both of them, and they both have their own pros and cons. Before reaching a conclusion, you must carefully peruse the upsides and downsides of both.

Option 1: You want to take out these loans with a broker

It may take some time to get it processed if you are looking to borrow money from a broker. They will run a soft credit check to know your credit rating and look at your income records to determine a lender that suits your financial condition.

Your application will be sent to a lender who will run a hard credit check to decide how much you can borrow money. The processing takes a bit longer time. Consulting a broker makes sense when you need money for a planned reason.

The chances of rejection for your application are bleak because a broker would peruse your credit report and bank statement to figure out the most suitable lender. Though a hard credit check will be run when the application is sent to the lender. They will be less likely to turn down your application.

You may have to pay a commission to a broker if you borrow money through them. It varies by the broker and depends on the loan size. Brokerage commission can add up the cost of the loan. 

You will have to do a lot of research to find a broker. Compare their fees and opt for the one that charges the lower fees. Further, you should choose a broker that has a large panel of lenders.

Although you will need to spend some time researching a broker. You can save a lot of time in researching a lender. In fact, there is no chance of getting trapped by a spurious lender as the broker is involved.

Option 2: You want to borrow money from direct lenders

You can avoid brokerage commissions if you want to borrow money from direct lenders. You will certainly save a lot of money in brokerage fees. However, some lenders may charge monthly fees apart from processing fees. You will have to research properly, so you choose a reliable lender who does not charge monthly fees.

You will have to spend a lot of time researching a reliable lender. As each lender charges different interest rates, especially when you are applying for bad credit loans on instant decision in Ireland, you should carefully do proper research, so you choose a lender that charges lower interest rates.

The chances of rejection are meagre in case you borrow money from an online lender because they carefully examine your financial situation to determine your affordability. If they find that you cannot afford to pay back the money you are borrowing, they will try to lend you less money based on your repaying capacity.

There is no risk of losing credit points because some lenders run a soft credit check. No hard inquiries show up on your credit report, and hence you will not lose credit points.

The processing of loans when you borrow from direct lenders is fast. It takes a couple of hours. The money is transferred within minutes to your bank accounts after the completion of the entire processing.

What other things you must remember?

It does not matter whether you buy direct from a lender or through a broker because you are ultimately borrowing money from a lender. A broker is just a mediator. Under both circumstances, you should be aware of:

1. Your credit score

Your credit score must be good. A good credit rating will let you have money from a direct lender at a lower interest rate. However, if you have a bad credit rating, you will not be refused, but you will end up paying a higher interest rate.

2. Your repaying capacity

Though a broker will run a soft credit check, a lender will run a hard credit check. Hard inquiries can show up on your credit report. This will lower the chances of borrowing down the line whether you get approved or turned down. Make sure you check your repaying capacity, so you do not borrow more than your affordability.

Bottom Line

Whether you should take out bad credit loans from a lender or through a broker, it all depends on your preferences. They both have their own pros and cons.

Make sure you weigh them up sincerely and then decide which one is better. Apart from this, you should keep your current credit score and repaying capacity in mind, so you do not get trapped in a bad deal.