Direct lenders are non-bank loan providers who usually operate online and are also denoted as “private lenders”. Traditionally, they do not involve a broker or a mediator in their lending processes. They are a sub-category of lenders offering private debt.
Thus, their working procedure is strikingly different from that of mainstream lenders. They oftentimes emerge as an alternate lending option when the traditional option remains unavailable. Now, new direct lenders in the UK have introduced some unconventional features.
This has led to a lot of confusion on who can actually make the most out of these loans. Besides, one greatest fears concerning this way of lending is whether it is a legitimate source or not. The only way to overcome these inhibitions is by digging deeper to know the pros and cons of this lending.
This can pretty much tell if you can reap any benefits by opting for them or not. Moreover, at the back of your mind, you will be careful about the setbacks that these loans can offer if you handle them irresponsibly.
Take a tour of this blog to understand the direct lending concept based on its perks and pitfalls.
Evaluate the benefits and setbacks of new direct lenders in the UK
They have come into existence as bank markets economise with time. Not every borrower can afford to agree to the conditions laid down by a traditional lender. A gap always prevails because of people seeking financial help that cannot be fulfilled by a bank.
New direct lenders are trying to bridge the gap and make borrowing a legitimate choice for many. The range of funding that they offer might not be too huge. They aim to fit into the shorter-term requirements of a borrower.
Thus, what you cannot expect from a traditional lender can actually be obtained from a direct lender. Now, since money is involved here and you are taking out debts, you cannot deny the risks of being part and parcel of this journey.
Check out the pros and cons so that you can conclude whether to borrow money from them or not.
Advantages of new direct lenders
Here, you will figure out the convincing factors about these lenders. Some flexibilities that you want to enjoy while borrowing but were never available from a conventional lender. Analyse them thoroughly so that you can find the best reasons to fetch money from new direct lenders.
· Any credit score is acceptable
This can be a lifesaving feature for many borrowers who are struggling with poor credit scores. Thus, here, you can get no credit check loans in the UK from a direct lender. Hard credit checks will not be conducted as affordability checks get the weightage.
Thus, your credit scores will not be revealed. Rather, your current financial state will be validated. Your credit reports will be ditched over your bank statements. This is because the latter can disclose how you are managing your finances currently.
The lender’s lookout will be to ascertain if repayments can come timely from your end. Your past scores cannot clear the air regarding your present financial capacity. Since this aspect can only assure the lender, hard verification is simply skipped.
· No collateral equation is there
The traditional lending has an image of asset-based funding usually. This impression does not go well with direct lending. This is mostly about short-term funding.
For this reason, security or assets will be part of the borrowing process. There is no need for you to keep your home or car at stake. Besides, direct lending opens the door for deprived tenants and non-homeowners.
Since they lack their own possessions, they might have to let go of a few loan opportunities. Despite having a requirement, they cannot borrow money. This funding solution will allow them to extract funds for trivial necessities without facing collateral requirements.
· Virtual mode of application
This is one of the biggest facilities you can avail of with direct lenders. You do not have to meet them in person. They will present an online form where you should provide a few brief details.
Filling out the form should not take much time. All you need is a laptop or a computer and stable internet connection. You should share valid details so that the lender does not get a chance to disapprove your application.
In fact, you do not have to pay a visit to the bank branch. You can browse the lending website virtually and without going out of your home. Be patient while entering details in your application, or else you will make a mistake.
· Speedy response and decision
Rounding out the online form takes less time. In a similar way, the lender will not keep you waiting to provide you with a decision. Since this is a short-term borrowing opportunity, you do not have to produce a lot of documents.
Your details in the application should be enough to let the lender process your request. No matter even when your request gets rejected, you will get a speedy reply.
§ Disadvantages of new direct lenders
Although a lot of things project a positive image of the lender, there are aspects you must be careful. Find them out here.
· Late repayment can be scary
The lender will provide you with a specific tenure within which you must pay back loans. Penalty and late charges will be levied by the lender if you miss any of the payments. Thus, the burden of loan debts will amplify if you skip any of the due payments.
· Your credit scores will suffer
One of the setbacks of delaying payments is that your credit scores will be blemished. Now, if you are already struggling with credit scores, delayed payments will be fatal for you. The recovery will become very difficult, and your finances will have to go through a tough phase.
The bottom line
Whether or not to approach a direct lender in the UK for loans should be a well-thought decision. You must study the pros and cons carefully as you will get to know a lot about this lending avenue. If you want, you can continue exploring further.
Jessica Rodz is the Senior Content Writer at Cashfacts. She has a long career in the field of content writing and editing. Jessica has the expertise in the UK lending marketplace where she has worked with 7 different lending organisations and acquired many responsibilities from preparing loan deals and writing blogs for their websites.
At Cashfacts, Jessica is managing a team of experienced loan experts and doing a major contribution in guiding the loan seekers via well-researched blogs. She has done graduation in Business (Finance) and now currently doing research papers on the UK financial sector.
