The difference between an indirect and direct lender?
What’s the difference between an indirect and direct lender?
As with anything, both and indirect and direct lender have advantages and disadvantages. You’ve likely experienced both types of lenders at some point in your borrowing history whether you know it or not. These terms also apply to a variety of loan types, such a auto loans, mortgages, installment loans, and online installment loans. While there may be some small difference in execution between the different loan types, they generally all have a very similar process. For the purposes of this article, we will focus the online installment loans.
Indirect lenders act as intermediaries between you the borrower and the financing company. An indirect lender will often times facilitate a lot of (or in rarer cases all of) the paperwork to receive the loan on the lender’s behalf. Generally you will end up completing some portion of the paperwork or online form on the lender’s end directly to close the deal.
Indirect lenders in the realm of online installment loans are essentially marketing platforms for the lenders themselves. They get a high volume of traffic and often times provide filters for the borrowers so that they can choose the amount of the loan they want and see several lenders at once. This gives the borrower the ability to choose the loan company they prefer. Often times there will be reviews and other attributing factors to make the lenders more unique outside of the loan terms.
These platforms with numerous loan companies and plenty of options for the consumer to choose are great for shoppers. It allows the consumer to choose which route they wish to go and it provides information on many different companies all in one location.
There are downsides as well. While some of streamlined the process dramatically, most create extra steps for the borrower and slow down the loan process. If you are in need of emergency funds or a quick turn around, not all indirect lenders will be for you. After spending the time deciding on a lender, there will often times be another set of information (if not the same) from the lender that they will seek directly from you before underwriting the loan. Also, since not all indirect lenders are created equal, some may prove to be more of an annoyance than anything. Some intermediaries will simply submit your information to several different lenders that you should qualify through all at once. This results in tons of pesky phone calls and emails from random lenders contacting you to complete an application through them.
Direct lenders are…. You guessed it, more direct. A direct lender is a company that is doing all the underwriting and management of the loan from the start. There is no intermediary, just you and the company you will be borrowing the money from. There are quite a few direct lending companies out on the internet but it always seems to be easier to find the indirect ones when doing a quick Google search.
Lenders like Credit Fair-E don’t just get you setup with a loan and then forget you. You will deal with the lender for the entire relationship of the loan. While some direct lenders may still have varying loan products, others like Credit Fair-E keep it simple with one product and set of terms.
For those that have no interest in shopping around and know what they want, a direct lender is for you. It provides a simpler experience for the consumer while delivering exactly what they said they would.
Benefits & Drawbacks To Both
While both have their advantages and disadvantages to consider, in the long run it is best you end up with a direct lender for your online installment loans. In any indirect method, the lender you borrow money from is paying the intermediary that you found them through. Who do you think ultimately pays for that though? Yup, you guessed it; you.
Once you have found someone that is able to provide you with financing, it is best to source your future loans through them (assuming you were happy with it). It will end up cheaper and save you time in future.
If you are looking for a direct lender online installment loan, I strongly consider you look at Credit Fair-E’s loan program. You can apply here.