What we state generically as a Lender is someone or an entity who lends you the money for whatever you want to purchase with it. A finer consideration would be Bank, Lending Company or Loan Broker. But there are differences between them and we will try to point out advantages and disadvantages of each one.
A Bank Is A Bank
Well, we all know what a bank is and how to spot one as we walk in the street. A lending company might be anybody who does not fit in the bank category, but has money to lend. The loan brokers are the most varied of the lot, as we shall see and have a unique feature. Mind you, there are good guys and bad guys everywhere, so that will certainly NOT be the subject. Each kind of lender has its pros and cons.
In the case of a bank, there is a notorious difference in backup. There is a financial power behind the bank that makes it the first option when we
need a loan. Definitely it is the most reliable of the lot, on average, of course, since they have a good name to care for. But the bank has a rather limited range of loans. Maybe they might say, We are sorry, but we do not do
car loans, or currently we are concentrating only on mortgage loans, or whatever, but they are not so ample.
An Ordinary Lender
Ordinary lenders might be anything on the map, but on average, they are less powerful than banks and will typically want greater securities or their interest rates may be anywhere from normal to high. On the other hand, they may be less strict when considering credit reports and employment standings, as long as you have a decent security.
Last But Not Least
Brokers as a rule are agents who connect a borrower to a lender, the real owner of the cash. Being brokers, they have the widest range of loans you could ever find. They match the borrower to the right lender for the occasion and will typically have a widespread network of contacts, clients and customers that will turn them into a very powerful lending agent.
This power enables them to have competitive rates and conditions that an ordinary lender would not have. As a complement to this, they will be able to give you a tailored loan, since it is their only business: To have loans for everyone.
Now, Spot Them
That is the question. A bank could certainly not just walk away with its customers’ money or commit fraud when luring their customers to sign an unfavorable contract. Definitely, banks are the most reliable of the lot. About the rest, it is just a matter of evaluating their setup, time they have been in business and references… lots of references.
Who Really Owns The Cash?
Brokers are really middle men. They do not own the cash. The real owners are not hiding, just resting on the brokers’ ability to multiply their cash.
Regarding banks or large brokers, they may at times need cash themselves, so they sell mortgages to investors. These in turn are your new lenders, to whom you have to pay back.
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