Direct Lenders vs Online Loan Brokers vs Loan Comparison Websites

Alternatives to short-term direct lenders

I’m often asked what the difference is between between direct lenders, online loan brokers and loan comparison websites. Here, I’ll quickly explain what each of them are, how they differ, and how using an alternative to a direct lender could enhance your loan search.

What are direct lenders?

Direct lenders that affiliate with both comparison sites and brokers tend to be short-term lenders (also known as payday lenders). They lend money, but they’re not banks, just firms authorised by the Financial Conduct Authority (FCA) to provide consumer credit. In the UK, the big brands include Wonga, QuickQuid, 118118 Money and Sunny Loans.

Why use online loan brokers and loan comparison websites instead of a direct lender?

Neither comparison websites or online loan brokers are lenders – instead, they are what is know as an ‘introducer’ (or intermediary). These firms are also authorised by the FCA but only for the function of introducing borrowers to lenders. In both cases, they get paid by the lender for the introduction, which means that the service is usually free for customers.

How online loan brokers work

Online loan brokers (or credit brokers) are an alternative to direct lenders. They give you access to multiple lenders in one place and provide a ‘done for you’ service. You simply apply with them and they submit your application to suitable lenders on your behalf. You’ll get an instant decision, and if you receive an offer it’s just case of completing the loan agreement on the lenders website.

You benefit from not having to make multiple applications — nor do you need to worry about finding the right lender for your circumstances. The downside is that you have no say in which lender you are paired with, but as the offer is a no obligation quote, you don’t have to accept it if you don’t think it is right for you.

There are a couple of further benefits:

  • You are only credit checked once you accept a lenders offer, in which case, they’re obliged to carry out appropriate checks.
  • Because your application is submitted to a number of lenders, approval rates can be much higher that applying with an individual lender.

How loan comparison sites work

Comparison websites bring together and organise information from a number of lenders so that you can easily compare loan products in one place. Typically, comparison data includes: loan amounts and terms, interest rates, example costs and application criteria. More sophisticated sites might also provide actual side-by-side cost comparisons for the specific loan you’re looking for, and credit search facilities which indicate the likelihood of being accepted for a particular loan.

You benefit from not having to shop around in various places, but you will need to follow up the advice yourself and apply with each lender individually.

Should you use brokers, comparison sites or direct lenders?

Should you use brokers, comparison sites or direct lenders? There’s no one right answer — it’s down to whatever suits your individual needs best. However, in many cases, good brokers and comparison sites can save you significant time and help you find the loan you need faster.

Happy hunting!

Payday Loans: The Essential Guide for First Time Borrowers

First time borrowers guide to payday loans

Although tens of thousands of new payday loans are taken out every day, for many borrowers it’s often a brand new and daunting experience.

However, if you can see through the many different lenders offering different interest rates, borrowing terms and lending criteria, the process is a relatively easy one.

This easy to follow guide is designed to give first time borrowers a basic understanding of what payday loans are, how they work and how to go about finding the right lender.

What are payday loans?

Payday loans are small unsecured loans taken out over a relatively short period of time — they’re also know as short-term loans. Typically, repayment terms range from 1 to 12 months in duration.

Payday lenders are not banks, they are firms authorised to provide consumer credit. In the UK, any firm that provides consumer credit is regulated by the Financial Conduct Authority (FCA.

Payday loans are a form of instant credit. The process is extremely quick with most lenders promising to fund loans within an hour of application.

Unlike traditional lenders, many payday lenders will consider applicants with poor, little or no credit history.

How payday loans work

While payday loans are available in-store, most people choose the convenience of applying online and having the funds transferred directly into a bank account.

Lending criteria

There are basic requirements that apply to all payday lender loans.

Applicants must:

  • be at least 18 years old;
  • have a regular form of income.

However, lenders may also have additional lending criteria.

Online application process

The process starts by filling out a simple online application form, which takes around 10 – 20 minutes to complete. Sites that claim you can complete an application in 2 minutes are misleading.

Once completed, the application is submitted for approval. A decision is usually made by the lender straightaway.

Other than a ‘Yes’ or ‘No’ answer, the lender may say ‘Yes,  subject to full approval’. This means that the lender needs more time to carry out further checks. In this instance, during normal working hours, approval should still take no longer than 30 minutes. It will always involve a credit check with a reference agency.

If approved, the money will be sent direct to you bank account. Most lenders have a regular transfer schedule, usually hourly or faster. In the UK, all major banks operate what is called a ‘Faster Payments’ service, which ensures the money is available almost instantly after it is transferred.

Save money by choosing the right loan duration

Payday loans are an expensive form of borrowing but thankfully they’re also very flexible, which is something you should take advantage of.

One way to decide how long to borrow is to base your decision on affordability. First calculate how much you can comfortably afford to repay each month (leave yourself some wiggle room) then simply work out how many months you need to pay off the total amount (including interest of course). Payday loans are configurable in monthly chunks so you can choose the exact repayment term you need with no waste. Here’s another take on how to choose the right payday loan.

If your finances are more fluid and you’re not sure exactly how long you’ll need to repay the loan, try to find a lender that allows early settlement without penalties. You can then err on the side of caution and choose a longer term without being tied in if your situation proves better than expected. A £500 loan repaid 1 month early could save up to £120 in interest charges!

How to compare the cost of payday loans

APR is a standard way to compare the cost of loans. However, APR is only an average rate — it may not be the rate that you’re personally offered. Also, some lender interest rates vary considerably depending on the term you choose.

Instead, use the calculator on the lender’s website to work out the total cost of the loan you need. Calculators tend to be at least 99% accurate and you’ll find it much easier to compare loans on a like-for-like basis. Calculators aren’t 100% accurate because some lenders display an illustrative figure rather than an actual figure — usually based on a 30 day month and/or using an estimated repayment date.

Ignoring the small print can be costly

We’re not suggesting you read all the small print but do ensure that you at least check out the main product features and the lenders late/missed payment policies — as we’ve already pointed out, a penalty free early settlement can potentially save you £100’s.

Know who you’re dealing with

Make sure you’re dealing with a proper authorised firm — there are some rogue websites out there who want to steal your personal details or fix you up with loan sharks.

If you find yourself on an unfamiliar website, you can easily check the firm’s authorisation using the Financial Services Register.

Here’s what to do:

  1. Go to the Financial Services Register.
  2. Find the Firm Reference Number (FRN) in the footer of the website.
  3. Go to the register and use the FRN to search for the firm.
  4. Go to the ‘trading names’ section and check that the website is a valid trading name. In the example below, look for or Peachy loans rather than Cash On The Go.

Example of FCA authorisation declaration on payday loans website

Can’t find the FRN or a matching trading name on the register — run away!

Are there any shortcuts to find payday loans quicker?

There are a couple of shortcuts that help cut down the leg work when searching for payday loans:

  1. Payday loan brokers provide access to a range of lenders with just one application. Lenders are filtered down to the ones that match your circumstances, then your details are submitted to interested parties until an offer is found. You can get approved very quickly using this method and it takes the least effort.
  2. You can use a payday loan comparison site to gather a short-list of reputable lenders. You  may also be able to filter your results further (by amount, term etc.) using information on the comparison site. This may still seem like a long-winded way to find a loan but it’s much more efficient than stabbing in the dark, which is what searching on Google is.

Here’s a bonus — because loan comparison websites and loan brokers are also regulated by the FCA, they will have carried out due diligence checks on all the payday lenders they work with, so you can be confident they’re safe to use.

Happy loan hunting!

Payday Loans: Know Your Rights

Payday Loans: Know Your Rights

Note: the page in the video is no longer available. Instead, check here to learn more about payday loan rights at the Citizens Advice Bureau (CAB).


This is Neil. He took out a payday loan to help with repairs on his car.

After losing his job he was unable to make repayments and the lender began ringing him and his family several times a day demanding money. They also took payments from his bank account without him knowing, meaning he couldn’t afford food at the end of the month.

Payday lenders aren’t allowed to do this.There are rules, which means when things go wrong they can’t chase you for money at all hours of the day, they can’t take money from your account without you knowing, and they definitely shouldn’t put pressure on you to borrow more money.

A good lender will help to arrange a fair payment plan that you can afford. If you’ve had a problem with a payday loan, speak to your local CAB who can help out and get your bank to stop payments being made without your permission.

It’s also important that you file a complaint, which can help resolve your issue as well as helping others who’ve also had difficulties with their lenders. Pop into your local CAB or make a complaint online at

How To (and How Not To) Look After Your Credit Score

Credit report

One surefire way of getting yourself a bad credit reputation is by missing payments or making late payments on your credit accounts. However, there are other less obvious ways in which you can unwittingly harm your credit score if you don’t pay attention to your actions.

Here’s how I came a cropper and how you can avoid doing the same.

Me, Gary and the fridge

I was looking to buy a small under-counter fridge. I’d already located the product I wanted at a local retail store. It cost a very reasonable £129, which I intended to pay for in cash.

After arriving at the store, I made my way to the home appliances aisle, re-checked the price, picked up a ticket to purchase the item, and headed off to the checkout.

En route, I was approached by salesman ‘Gary’,  who seemed very keen to to tell me all about the interest free offer the store were running.

Gary’s short but sweet sales pitch — “May as well, it’s free!” — seemed like a decent argument at the time, so I stashed the cash back in my wallet and followed him to his desk.

After filling out some paperwork Gary disappeared off into the back office to get things finalised. He reappeared 15 minutes later — shock horror — to tell me that the finance company had declined my application!

What happened to my credit?

I couldn’t possibly have been declined — I had perfect credit — or so I thought.

I had a great job that paid well, and all of my regular payments were always paid on time every time. I even had the cash to pay for the item in my pocket!

In fact, I had just learned a hard lesson. Credit refusal doesn’t only happen to people with bad history — it happens to people who misuse their credit too.

Can’t resist the lure of a good deal

To try to understand what had gone wrong, I subscribed to a one month free trial with Experian, one of the UK’s three main credit agencies.

As I expected, my report showed that my payment profile was good. However, I did find a trail of old credit applications that were still showing as active. This consisted of a number of store cards and unused credit cards.

The cards in question had each been taken out to qualify for a one-off incentive, such as ‘10% off a first order’ or ‘6 month interest free’. All had since been ‘filed away’ at the back of a kitchen drawer and never saw the light of day again. However, because I hadn’t cancelled the cards, the unused credit may have been seen by credit companies as an opportunity to build up significant debt.

I also had a number of short-term 0% finance deals on items that I could have easily paid for in full. My problem is that I just can’t resist the lure of a good deal. This could have given potential lenders the impression that I relied on credit more than I actually did.

Having identified what needed fixing, my situation was easy to put right. Here’s what I did:

  1. I cancelled the cards I didn’t use.
  2. I paid off my short-term finance as fast as I could.
  3. I didn’t take out any new credit for 6 months.

Common reasons for failing a credit check

Here are some common reasons you might get turned down for credit:

  • You’re not registered on the electoral roll at your current address.
  • Your credit report contains too much adverse information — such as late payments, defaults or CCJ’s.
  • You’ve made too many credit applications in a short period of time.
  • Lenders don’t think you’re in a position to take on further credit.

Don’t unwittingly make too many applications

Too many credit applications in a short space of time will impact your credit score. One way people unwittingly do this is when applying for payday loans.

Because payday loans are quick and easy to apply for, people who initially get declined by one lender tend to reapply with another straight away. This sometimes happens over and over, resulting in multiple credit checks being recorded in quick succession.

Check your credit score for free

Nowadays, there are plenty of opportunities to get your credit report for FREE, so there’s really no excuse for not reviewing your score regularly.

The ones below are completely free — no free trials — no credit card and bank account details needed — just FREE forever:

I personally use ClearScore and have done for some time. I would recommend it to friends and family.

Key takeaways

Taking out credit should always be a considered decision, not something you do on impulse. Keep in mind that a bad choice today may impact your ability to get the credit you need in future.

Whatever you do, don’t take out credit just to get a deal on something else. Signing up for a store card to get 10% (£5) off a new coffee machine is tantamount to credit abuse.

If you didn’t consider the need for credit long before you got to the checkout, you don’t need it. Stick to your guns and pay with what you already have in your wallet.

Review your credit report regularly. Out of sight is out of mind, and that’s not a good thing when it comes to your credit.