Direct lender is popularly also known as the reputed lender. He is the one, who generally provides loans to the brokers. The broker acts as a bridge between the reputed lender and the borrower. In situations when, you have ample time for availing loans, may be for big industrial projects or similar ventures, brokers can be beneficial, as they help in identifying the best sources of such loans.
But, these brokers
may not be feasible and worthy in many other situations. A common man is generally in need of money instantly. Time becomes the most important factor in situations, he applies loan. Brokers are bound to take extra time to process the loan, because they are not the direct lenders. However, the reputed lenders can instantly process the loans, without much delay after quick scrutiny of the documents.
The brokers and reputed lenders work in a similar fashion. Like the reputed lenders, the brokers scrutinize major documents; measure the credibility of the borrower, assets & liability ratio, etc. The credit scores they provide and various other parameters of evaluation are more or less similar in both cases.
The major difference lies here. The intermediates are bound to charge more than the source. In some or the other way, may be through commissions, processing fee or through other modes, the brokers tend to charge higher charges for the loans they provide. The interest rate is significantly low, in case of a direct lender.
Scale of operation
The reputed lenders operate in a considerably larger area. They have accessibility or reach, may be through physical outlets or through online portals, to all parts of the nation. They have a rich connection and a national identity. Thus, considerably they operate on large scale, compared to the local lenders or brokers. The presence of these brokers can be felt only in two or three localities. Their scale of operation is very small and is limited to a particular geographic area.
Licensing and Monitoring
A direct lender is much more systematic and obligatory to law, compared to the brokers. The reputed lenders are less in number, as they are licensed and are strictly monitored by some or the other institution, usually headed by the government. The brokers may or may not possess any license. No law is implied to the brokers and the governing bodies cannot authorize control over them.
Use of technology
Brokers usually are not so organized to implement the modern technology into their business. They deal on small commissions and hence, try to minimize costs, by using conventional modes of approaching individuals for loans. They may sometimes also use various modern modes of advertisements like the digital campaigns, etc, but, are still inferior to the technological advancements used by the direct lender.
The reputed lender offers many services online nowadays. It maximizes the available technological resources and renders the same in the form of value added services to the customers. Since, the reputed lender has a larger base of customers compared to the brokers; the cost can be adjusted amongst the revenue it generates.
This has led to many services like online loans, with just a click of a mouse button.
It is important to realize the repayment scheme, especially for the short term loans. The repayment schemes may be quite liberal and customized, when they are availed from the reputed lenders. The payment tenure, installment, type of installment, frequency, etc, are mutually decided, in case of a direct lender.
However, these benefits may or may not be provided by the broker. They tend to offer rigid repayment solutions to the borrowers and not the customized ones.