Navigating the online loan application landscape is hard. It helps to familiarize yourself with the two common types of lenders—affiliate and direct—and understand the differences between them.
When you’re shopping for installment loans for bad credit online, you’ll run into two main types of lenders: affiliate and direct. How are they different? What are the benefits and drawbacks to each?
Knowing what to look for will help you find the best loan partner to get you money fast when you’re struggling with credit.
Bad credit defined
We covered what makes up your credit score in Guaranteed installment loan offers for bad credit. Briefly: The major credit bureaus get data on your financial history from your banks, credit card companies, and other lenders.
They compile that data into a credit score. Credit scores say how well you’ve done at managing debt. If you have a lot of debt or you have a history of late payments, to name a few factors, that leads to a low credit score.
Scores range between 300 to 850. Higher is better. Lenders usually consider scores of 669 or below “bad credit.”
What’s the difference between a marketplace and a direct lender?
Marketplaces do not issue the loan themselves. Instead, during the application process, they work with multiple financial institutions behind the scenes. When you go to a marketplace, they take your information and match you with one of their partner financial institutions—the one they think will be most likely to issue you a loan. They collect fees for doing so, but they don’t directly issue money and they don’t make interest on the loan.
Direct lenders, on the other hand, actually loan you the money. They process your application, assess if they think you’re going to be a borrower who pays back, and actually issue the loan. They make money on interest and other fees they may have.
Indirect marketplaces: Pros and cons
Pros: Marketplaces do all the work you’d have to do to find a lender, so that helps you save time. It also means you don’t have to apply to multiple lenders, helping you save time putting in multiple applications on various lender sites (at least for an initial loan offer).
Cons: In the end, affiliates have no control of the loan decision. They often do not collect the complete details necessary for a lender to make a decision on a loan application. So you’ll likely have to fill out quite a bit more information down the line with the lender you’re matched with. They don’t own the money they’re lending, which means they can’t make any decisions on whether you get approved or not. Many times, borrowers who have bad credit often get denied, and there’s nothing the affiliate can do about it.
Direct lenders: Pros and cons
Pros: Direct lenders control the entirety of their loan rules. This means when you go to apply for loans from direct lenders you can generally understand whom they will lend to and how much it will cost. You can also try to work with them directly to get approval, sharing more detail on your case that may help them consider you.
Cons: You have to do the work to figure out which direct lender for bad credit is right for you. Sometimes they’ll charge high-interest rates. And even though they control the loan decision, it still may be hard to get approval. That’s because they rely so heavily on credit history when assessing a borrower. So if you get declined, you may have to go through the application process more than once.
Maybe that’s why you’re here, because marketplaces and direct lenders alike have rejected your application.
Why Klya is the best direct lender for bad credit installment loans
We understand how frustrating it is to be declined. Not only do you need the money fast, but also you don’t want your credit score to be hurt. That’s why we prioritize approval for individuals with a FICO score above 500 and at least $12,000 in annual income. We can do this because we’re a direct lender. While many direct lenders use bad credit as a reason not to believe, our comprehensive approval model for borrowers with bad credit considers more than credit scores.
Our loan review rules are designed to take a chance on you rather than screen you out. We couldn’t do that if we were an affiliate. Too many direct lenders look at your credit score, which only tells them about your past without any added context of why that is. While many direct lenders reject borrowers with bad credit, Klya Credit chose to be a direct lender to help those borrowers.