A couple of years ago, it was really only Lendo and Freedom Finance who were some well-known loan brokers here in Sweden, maybe there was someone else but these were not seen as much at all.
Nowadays, however, a number of players have emerged and therefore it may be fitting that we look here at some advantages and disadvantages of hiring a loan broker.
What is a Mortgage Broker?
It might be best to start by answering this question if you, the reader, are not aware of it. A loan broker is easiest to describe as an intermediary between you and the lenders. You submit an application to the loan broker, who then sends it to the banks and loan institutions with which they cooperate. These will then send back an answer with what interest rate etc they offer if they now want to lend money. The borrower can thus choose offers from several lenders simultaneously and choose the best option, which is usually the cheapest.
Normally, it costs money to hire an intermediary, but not in this case. It is completely free for you as a borrower to hire a loan broker. Their way of making money is for lenders to pay them. If they send a customer to a lender who chooses to borrow, they simply receive X amount of USD per loan. So no extra costs for you.
Basically, it is good to borrow through a loan broker and this has a lot to do with the fact that you just submit an application and get many answers. For example, if you contact all these lenders yourself and submit an application, the risk is that you will get a little too many inquiries at UC. An application through a loan broker only gives you a request from UC which is no problem at all.
The fact that many requests are negative has much to do with the fact that there is a delay in the system. One request is registered but another lender may not know if you have borrowed money from them or not directly. It can take several weeks for the loan to come up in the system, which can create uncertainty. To illustrate what a problem this may be for a lender, we can imagine a person who, on the same day, submits applications to 15 different lenders and gets approved for loans from all of them. All these loans are then taken out and the person obviously cannot pay the costs or maybe just withdraw the money. No lender would want to lend if they knew about this and that is why many inquiries are bad.
Then it certainly does not have to be such a tapered case, but it is enough for a person who takes out a couple of loans quickly which it is not really able to. If a lender would then lend money, the risk is that they will never get them back and make a loss.
The biggest advantage we have had in the past is that you get answers from many lenders at the same time. Thus, you have very good opportunities to choose a loan that has a good price. Usually, the cost of a loan is the most important reason for who to choose.
Since you get answers quickly from multiple lenders, it also means that you save yourself time to contact other potential lenders. Sure, it takes a little while (often around a day) before you get an answer to your application with a loan broker, but this is often not a problem. So the time you save instead is the active time you need to spend on the search.
The disadvantages are probably only two and one of these is actually not that important while it is important to be aware of the other. The first disadvantage that does not really matter so much is that it is only possible to take private loans at the moment through a mortgage broker. Sometimes they can write that you can use the money for a car etc but that is then the question of private loans with this purpose only. Within a few years, we probably have several services for other types of loans similar to loan brokerage, but this is a little away.
However, there is a rather large disadvantage with the loan intermediaries at the moment and this is something that is rarely mentioned. If you look at the TV commercials for Lendo, for example, they talk about the fact that they cooperate with the banks and that you can therefore with great security save money by using them.
What they do not mention, however, is that they do not cooperate with all banks. Unfortunately, it is also the case that it is precisely the large classical banks that they often do not cooperate with. Thus, there is a risk that you will miss the cheapest loan as the large ones often have good interest rates. One tip can, therefore, be to check yourself with your regular bank even if they can beat the price you have received through the loan broker.