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What Is a Loan Broker?

Loan Brokers are an entity or individual party that deals with the brokerage of consumer credit. Credit brokers are more commonly dubbed as "loan brokers" as an unofficial name, but the correct term is 'Credit Broker'.

A Loan Broker is essentially a creditor, normally on a commission basis. Loan brokers typically have a portfolio of ^[1] (Financial Conduct Authority) regulated lenders that they are in partnership with. Lenders are bound by a code of conduct to ensure that they have a duty to protect a consumer.

Loan Brokers - Regulations & Legislation in the United Kingdom

In ^[2], credit brokers are covered by the ^[3] which is a legislation that covers consumer credit as a whole. The act was amender in 2006 with the introduction of the Consumer Credit Act 2006 which was introduced to create an ^[4] scheme and increase the authority of the ^[5] regarding consumer credit, including the consumer credit agreements. This now allowed borrowers to challenge unfair debtor-creditor relationships in court, with one of the most infamous cases in the UK being Wonga.com, who were notorious for ^[6]. Due to the update to the Consumer Credit Act, consumers were able to challenge Wonga, thus, creating the demise and subsequent ^[7]. Compliant ^[8] have since come onto the market, at a fraction of the APR percentage and follow the guidelines set by the ^[9], ensuring consumers are not exposed to the same financial risk as ^[10] of ^[11] to 0.8% per day.

Technology & The Evolution of Digital Loan Brokerage

The rise of the internet has seen the evolution of loan brokers utilising websites, ^[12] and downloadable ^[13] to evolve loan broking away from just the high streets and into the palm of our hands and on our desktop screens. This has made credit and loan brokerage more profitable for the brokers as they now have a higher reach to consumers, whereas historically brokers made their money through referrals from footfall into their high street stores.

The Difference Between a Lender & a Broker

A lender is a financial institution that makes loans directly to you. A broker does not lend money. A broker finds a lender. A broker may work with many lenders. The consumer then reviews the lenders displayed by the credit broker and selects the best option for their financial circumstances.

Loan Brokers and Corporate Social Responsibility

Loan brokers have more of a ^[14] to ensure consumers are aware of help from debt charities such as the ^[15], ^[16] and ^[17]. This is also overseen and enforced by the Financial Conduct Authority.

[1] FCA

[2] UK Law

[3] [Credit Act 1974]

[4] Ombudsman

[5] Office of Fair Trading

[6] troversial advertisements targeting of the elderly

[7] se into administration for Wonga in August 2018

[8] Wonga Loan alternatives

[9] [[1]]

[10] 2015 Financial Conduct Authority capped the interest rates

[11] [Loans]

[12] tal marketing

[13] [apps]

[14] [social responsibility]

[15] Money Advice Service

[16] National Debtline

[17] Step Change

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