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Difference Between a Broker and a Lender

Broker vs Lender

The difference between a broker and a lender is that the lender provides money to the debtor, whereas a broker is an agent who offers the loan products provided by various investors.

There are two types of lenders, retail lenders and wholesale lenders. Those who commence with the loan process themselves are called retailer, and those who hire contractors or brokers are called wholesale lenders. A broker acts like a commercial agent who is hired by the lender, or works as a freelancer. His target is to find potential customers. His job description includes counseling, credit problems and processing the loan etc.

Large lenders have a network of both retail and wholesale lending, and they hire a number of brokers who offer the loan products to customers. A broker compiles the file of information in which there are details about credit reports and different verifications, such as employment, assets, appraisal and transactions. The file is handed over to the lender who funds money once it is complete.

Large banks and lenders are called portfolio lenders, and they are also referred to as depository institutions. Credit unions, commercial banks and savings, and union and loan associations are all portfolio lenders.
The lender funds directly, while the broker sells loans and represents different lenders. Despite the differences between the lender and broker, both of them are looking forward to making a profit, and they have hidden markup fees as well.

Brokers and lenders need to obtain a license before offering their services. It is necessary to avoid illegitimate brokers or lenders, as doing business with them is not recommended. Their credibility can be verified with the help of various organizations.

Lenders lend the money to a borrower to pay the loan off. The loan also includes the added cost of interest. Different lenders have rate differences, and also their mark ups or interest rates are not the same.
Brokers act as intermediaries or agents between a client and the lender, and a commission is usually earned upon completion. They handle the process of loan in a correct and legitimate manner.

Summary:
1. Lenders provide loans, whereas the broker provides the services for obtaining loans.
2. Brokers act like a commercial agent who works on a commission basis.
3. Large lenders, like banks or unions, are also called portfolio lenders.
4. Lenders and brokers both need to obtain a license before commencing their business.
5. Brokers and lenders both have hidden markups or interest fees that they charge to the customer for the loan .


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