Direct lenders vs credit brokers: what’s the difference?

A direct lender lends you its own money and decides on your application. A credit broker like Payday UK doesn’t lend. It passes one application to a panel of lenders, and each lender decides for itself.

Credit broker vs lender: a quick comparison

A direct lender decides your application and funds it themselves. A broker puts the same application in front of several lenders and shows you what comes back. Every difference below follows from that one distinction.

What is a direct lender?

A direct lender uses its own money. It decides yes or no, sets the rate you're offered, and pays the loan out itself. You apply straight to that one firm, so what you see is what's on the table.

• It decides. The lender runs its own credit and affordability checks and reaches its own answer.

• It prices. The rate, amount and term come from that lender alone. There's nothing to compare.

• It manages the loan. Any change, extension or complaint goes to the same firm, from start to finish.

Because only one lender sees your application, there's only one answer to wait for.

What are the advantages of using a direct lender?

Going direct can be beneficial in the right circumstances. Here's what it offers.

What are the disadvantages of using a direct lender?

Going direct has some trade-offs too, and they're worth weighing up before you apply.

•  No comparison. If this lender says no, you’ll need to apply elsewhere, and any full search it ran stays on your file.

• They may run a full search. Some direct applications trigger a full credit check straight away. Other lenders can see it, and it can affect your credit score.

• You do the shopping around. Comparing rates means applying to each lender separately, and each one may run its own check.

• You're stuck with one offer. If the rate, amount or term the lender offers doesn't fit, there's no alternative from the same application.

Choose a direct lender if...

A broker earns its place when you don’t know which lender suits you. When you do know, it adds a step and an extra data share. Go direct, or stop short of borrowing, when any of these apply.

• You already borrow from a lender and qualify for its returning-customer rates.

• Your bank offers an arranged overdraft or a small personal loan. Compare the cost before you look anywhere else.

• You could use a cheaper option, such as a credit union or a Budgeting Advance. Our guide to alternatives to payday loans explains each one.

• You already hold a credit card. Using a card you have is often cheaper than new short-term credit.

• You want one specific lender, or the smallest data footprint. Apply to it yourself and skip the panel.

• You want advice rather than credit. The free debt advice services below charge nothing and sell nothing.

We would rather say this plainly than have you use a broker you do not need.

What is a credit broker?

A credit broker doesn’t lend. It takes one application and puts it in front of several lenders on its panel. Then it shows you any offers they make.

• It doesn't decide your application. Each panel lender assesses you separately, against its own criteria.

• It doesn't set your rate. Whichever lender accepts you sets the price, not the broker.

• It doesn't hold your money. The lender that approves your application pays it out and takes the repayments.

The broker's job stops at the introduction. It matches your details against the panel, then hands you over to the lender you choose.

What is a lender panel?

A lender panel is the fixed list of firms a broker sends applications to. It isn't the whole market. Banks, building societies and credit unions generally don't sit on broker panels, so you'd need to approach them yourself. On Payday UK’s panel, lenders offer loans from £50 to £5000, from 9.3% APR.

What are the advantages of using a credit broker?

A broker adds a step, but that step can pay off in several ways.

What are the disadvantages of using a credit broker?

A broker isn't the right route for everyone. Here are some of the considerations to weigh up before you apply.

• You don't know which lender you're choosing until the end. You can't shop by name. You only find out who's offering you the loan once the panel has answered.

• Your data is shared with multiple lenders. Your details go to more than one company, not just the firm you end up borrowing from.

• Not every broker works the same way. Some charge a fee for the introduction, so always check a firm's terms before you apply.

• It won't help if you already know your lender. If you're returning to a firm you trust, going direct skips the extra step entirely.

Choose a credit broker if...

A broker earns its place exactly where a direct lender falls short: when you don’t know which lender suits you.

• You’ve never borrowed from a short-term lender before and don’t know which one suits you.

• You’ve recently been declined by a lender and want to limit hard searches. Our bad credit loans page covers how panel lenders assess you.

• You want to compare more than one offer without applying to each lender separately.

• You're not tied to a specific lender and just need a quick loan that fits your budget.

Am I dealing with a lender or a broker, and how do I check?

Only a lender can approve your loan, and only a lender can change it once you have it. You don’t have to take anyone’s word for it. Every UK firm doing either job has a public register entry stating what it may do.

• Search the firm name, website or firm reference number (FRN) on the Financial Services Register.

• Read the permissions. “Credit broking” means it introduces you to lenders. “Entering into a regulated credit agreement as lender” means it lends its own money.

• Check whether the firm is an appointed representative and who its principal is. The principal is responsible for the representative's regulated business.

• Match the FRN in the website footer against the register entry, and read its trading names. Clone firms copy real names and numbers.

• If anything does not line up, follow the FCA's steps for how to check a firm or individual is authorised.

How does the application process differ for credit brokers and direct lenders?

The forms look similar. What happens after the form is submitted doesn't.

Applying to a direct lender:

1. You apply straight to the lender you've chosen.

2. It runs its own credit and affordability checks. This can involve a full search from the start.

3. It decides yes or no, and sets the rate, amount and term itself.

4. If declined, that application is closed. You’d need to start again elsewhere.

5. If accepted, you sign its agreement and it pays the loan out directly.

Applying to a credit broker:

1. You fill in one application with your details and how much you want to borrow.

2. We send your details to our panel, and each lender runs a soft search. It won’t affect your credit score.

3. Panel lenders that can help will make you an offer; those that can't don't show one.

4. You compare what comes back and pick the lender you want.

5. That lender runs its own full check before it pays out, and its agreement, not ours, is what you sign.

Is Payday UK a lender or a credit broker?

Payday UK is a credit broker. We don’t lend money ourselves.

How we work

• We take one application and put it in front of the lenders on our panel.

• The lenders on our panel run a soft search first, so checking your options won't affect your credit score.

• We never hold your money. The lender that accepts you pays it out and collects your repayments.

• We charge you nothing. A lender pays us if you go ahead. Never you.

Our panel

Panel lenders offer loans from £50 to £5000, from 9.3% APR. High-cost short-term loans are price-capped by the FCA, but not every loan on the panel is covered. See APR explained for how the cap works. Our privacy policy names the types of firm we share your details with.

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One application searches our panel of FCA-authorised lenders instead of applying to each in turn, so there is one search on your file rather than several.

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Will I be approved?

Checking your eligibility uses a soft search only, so it will not affect your credit score.

Check eligibility Soft search. Won’t affect your score

Representative example: Amount of credit: £500 for 6 months at £100.22 per month (final payment £100.21). Total amount repayable of £601.31 Interest: £101.31 Interest rate: 66.49% pa (fixed). Payday UK is a registered trading name of Payday Loans Ltd, who are an appointed representative of Flux Funding Limited, who are a credit broker, not a lender. Registered in England and Wales (Company number 12430457 / FRN 921539).

Common questions

How do credit brokers make money?

We don’t charge you a fee. If a lender on our panel gives you a loan, it pays us a commission.

Are all credit brokers regulated?

Any UK firm offering credit broking must be FCA-authorised, or an appointed representative of a firm that is. Check a firm's status on the Financial Services Register before you apply to it.

Which is better for my credit score, a lender or a credit broker?

Neither is better outright. Through a broker, panel lenders use a soft search, which won’t affect your credit score. Applying direct to several lenders yourself can mean a full search each time.

Do lenders or brokers charge fees?

A lender charges interest, and default fees if a payment's missed. A broker may or may not charge for the introduction. Payday UK doesn’t charge you a fee. Any commission comes from the lender, not you.

Can I apply directly to a lender after using a broker?

Yes. Using a broker doesn’t stop you approaching a lender yourself, before or after. The soft search panel lenders ran won’t affect that application either.

How can I check whether a lender or broker is legitimate?

Search its name or firm reference number on the Financial Services Register and read its permissions. The FCA’s guide on how to check a firm is authorised sets out the full steps. Our guide to borrowing money safely covers the wider warning signs.

Whichever route you take, read the agreement before you sign it. It's the only document that binds you, and it names the lender you're actually borrowing from.