When you’re looking for car finance, the chances are at some point; you’ll deal with a broker. But what’s a credit broker, and what do you need to know before dealing with them?
What’s a credit broker?
A credit broker is an individual or a company that helps people find credit by finding and putting you in touch with a finance company that can offer you a loan.
A car credit broker offers the same service – acting as a middleman between you and the finance or leasing company.
Many people find using a broker simpler than searching for finance themselves, as you can provide them with your details, requirements and budget, and they do all the legwork of finding the best deal for you.
What’s the difference between a broker and a lender?
The key difference between a broker and a lender is that a lender will be able to provide finance directly to you.
A broker will go between lenders to find the right deal to meet your needs before putting you in touch with the lender or even acting as a liaison.
What authorisation should I look for?
All legitimate credit brokers, such as Hippo, are authorised and regulated by the Financial Conduct Authority (FCA), who are there to protect consumers.
The FCA ensure that all credit brokers treat their customers fairly and ensure any communications are upfront and not misleading, such as making it clear that they are a broker and not a lender.
You can check the Financial Services Register to confirm that the FCA regulates a broker by searching the name (you should find the name on any communication such as a website, letter or email).
What to look out for
If you don’t fancy the idea of negotiating a finance deal in person, then a broker is ideal. However, you should always avoid any brokers that ask you for money up-front to find the best deal.
It’s an FCA regulation that a credit broker must give you a written information notice setting out details of fees.
A reputable broker should also have good previous customer reviews, so it’s worth doing your homework first when choosing a broker.
Most brokers also won’t have the facility to take your old car in part exchange. At Hippo, we have the advantage of being both a dealer and a broker and offer a dual service.
How does a broker use personal information?
One big advantage of using a car broker is that you only have to make one application and submit your details once.
A broker will need your personal information to find a deal for you, as their role is not only to find you the best deal but also the deal you’re most eligible for.
Once your application details have been taken, any documentation you provide will go straight to the lender. The broker will not keep hold of these.
The General Data Protection Regulation (GDPR) also means that details, such as your email address for marketing, can’t be passed to third parties without your express permission.
Can a broker help with bad credit and other financial difficulties?
Financing a car can be hard work, especially if you’ve had financial difficulties in the past.
Some brokers, like us here at Hippo, will have access to specialist lenders who can offer finance to people with a variety of credit histories.
We can help with whatever your requirements, saving you time and effort turning to a lender that may not be able to help you.
Reasons to get pre-approval from a broker
Yes, getting pre-approval from a broker will certainly save you a lot of time and hassle when it comes to applying for finance.
However, some brokers can do more than that by protecting your credit score in the process.
When you apply to a car finance lender for a quote, they usually conduct something called a hard credit search.
This not only leaves a record on your credit report, but it can also damage your credit rating if there are too many of them.
Some brokers, like Hippo, will only ever use a soft search in the first instance to ensure pre-approval from the lender.
This way there will be no impact on your credit score and won’t affect your chances of borrowing in the future.
You can see if you’ll be approved for car finance quickly and easily by using our soft search Apply Now service. Just click the button below to get started.