Pros and Cons of Direct Lender vs. Loan Matching Service

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When it comes to online loans, you have many choices. Although you may need money in a hurry, it’s important to know what you’re getting into. First of all, unsecured loans, such as payday loans or installment loans, are expensive and should only be used for short-term emergencies. They are not long-term solutions to financial issues. Still, if you’re looking at these loans, you probably have less-than-stellar credit.  Another option is online personal loans which you have better interest rates and longer loan terms but this often requires borrowers with a fair credit at least.

As you peruse the various websites of online loan services, one of the first things you should look for is if the site is a loan matching service or a direct lender.

Pros and cons

What is a loan matching service?

It isn’t always clear that a lender site you land on is a loan matching service or loan connecting service. These websites often look like those of direct lenders. A loan matching service doesn’t lend money nor broker any loans. Instead, they match or connect you with one or more lenders which will likely purchase your loan application.  The owners of these sites sell your application to the highest bidder for your lead.

How to tell if the site is a loan matching service site?

The easiest way to find out if the site is a loan matching service site is scroll down to the bottom of their page and read their disclosures.  Most of the time, they will indicate they are not a lender or broker you any loan.  They mainly serve as a loan matching service by helping you connect to many online lenders at once.  Examples of loan matching services are or

From these sites, you fill out a complete application online; if your application is eligible, you will then be notified by a few lenders who would like to offer you a loan. If for any reason you don’t like the agreement terms, you can always turn down the loan without any obligation.  This way can often help borrowers who don’t like to fill out multiple online applications from various lenders to save them time.

Pros of a loan matching service

  • One application for multiple lenders: This can tremendously save you a lot of time looking for a lender.  The application will ask all the necessary questions, and it will be forwarded to multiple lenders and thus do all the loan shopping for you at once.
  • Bad credit doesn’t matter: Your credit score is only a small part of the loan approval process. Decisions are based on various criteria, and each lender is always different than the other. Things they can focus on can also be: your income, debt to income ratio, how long have you been employed, marital status, education level, and etc.  If you have a good and steady income source, you stand a greater chance of being approved.
  • More lender choices: Since multiple lenders all get your application the same way, they will often compete and offer a better rate than other competitors.  This could also help you land to the lowest interest rate offer.

Cons of a loan matching service

  • You’re not really sure who will offer you a loan at then end until you see the agreement: Unlike applying through a direct lender, you can’t research the company or find out the rates before.
  • You may receive unwanted emails and calls from other companies.

What is a direct lender?

Unlike a loan matching service, a direct lender is a company that loans the money directly to you. Few examples of these types of company are Upgrade and Avant.  Some lender may not serve loans in your state so be sure to check out lender’s site for your qualification.  You can also use our lender search tool to find our recommended direct lenders for your State.  When you complete their secured online application, the company will assess your creditworthiness and other criteria to evaluate their lending risk.  After their quick online evaluation based on your profile, if they think you have a higher risk rating, they would provide you with a higher interest rate loan or simply reject your application.  On the other hand, if you have a lower risk rating, you can be approved with a lower-interest rate loan.

Pros of a direct lender

  • You know the company who’s making the offer: You get to research the company, read what others say about it, and find out about the approximate loan terms and rates before you even apply.
  • Bad credit doesn’t matter: Loans are typically based on your income and other criteria, and not solely credit report. Direct lenders like SoFi look at your education level as part of their loan evaluation criteria.
  • Better customer support: You can often get customer support directly from their own site.

Cons of a direct lender

  • Loan comparison shopping can be time-consuming.
  • The lender you like may not be available in your State.

Top direct lenders

LendersLoan Amount Loan TermsFeesCheck Rate

Avant Review
$2,000 - $35,000 24 to 60 mo Up to 4.75% of the loan

APR: 9.95% - 35.99%

Upstart Review
$1,000 - $50,000 36 to 60 mo 1% - 6% of the loan

APR: 8.92% - 29.99%

Compare rates from multiple lenders. Discover your lowest eligible rate.

It's free, quick and won’t hurt your credit score
NetCredit Review
$1,000 - $10,000 6 to 48 mo Not disclosed

APR: 34% - 155%

SoFi Review
$5,000 - $100,000 36 to 84 mo No fees

APR: 5.49% - 14.49%

Payoff Review
$5,000 - $35,000 24 to 60 mo 2% - 5% of the loan

APR: 8% - 25%

Best Egg Review
$2,000 - $35,000 36 to 60 mo 0.99% - 5.99% of the loan

APR: 5.99% - 29.99%

Freedomplus Review
$10,000 - $35,000 24 to 60 mo Up to 5.99% of the loan

APR: 4.99% - 29.99%

Lendingpoint Review
$3,500 - $20,000 24 to 36 mo Varies by state

APR: 15.49% - 34.99%

Prosper Review
$2,000 - $40,000 36 to 60 mo 1% - 5% of the loan

APR: 6.73% - 135.36%

What is a P2P loan?

There’s one other option to consider: a P2P loan. P2P means person to person or peer to peer. Examples of peer to peer lending websites is Prosper. These sites are made up of two types of people: investors and borrowers. Investors put up their money. Borrowers fill out their applications. Borrowers get loans at fairly decent rates. Investors make a little money through borrower’s interest payments.  To learn more about P2P loans, you can visit here.

Online Direct LenderLoan Matching Service
(Loan Connecting Service)
Application Time Saving
Better Customer Service
More Lender Choices
Receive Multiple Offers
May Receive Multiple Calls
Know Your Estimated Rate Before You Apply
Reputable Sites Avant,
Best Egg,

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