Why is Using a State Licensed Direct Lender Important?

There are so many options for loan products these days, and the financial landscape is so vast, that it’s important to use a state-licensed direct lender when you need to borrow money. While to most it may seem like all lenders should be licensed, not all of them are, and knowing the difference between the two can save your finances. We’re going to look at exactly why it’s so important to use a state-licensed direct lender, what it takes to become one, and how they compare to indirect lenders.

The Importance Of Using A State Licensed Direct Lender

The biggest reason that the direct lender you use should be state licensed is that it indicates that they have met specific criteria with government and regulatory bodies to obtain that license. Additionally, for them to keep that license, they need to make sure that their services are kept up-to-date and aligned with current regulations.

How Do Direct Lenders Get Licensed?

To even be eligible to apply for a license from the various credentialing bodies, the lending organization needs to adhere to a strict application process that puts their business and operations under a microscope. At the minimum, they will need to produce:

• A robust and detailed business plan
• Disclosures, financial and otherwise
• Certificates of authority
• Proof of meeting the requirements of financing
• Background check results for every employee that is involved with, or has any part in, the lending process
• Surety bonds as required by local and state government

Any lenders that are going to deal specifically with mortgage lending or home loans will need to meet additional requirements. Included in these requirements is getting approval from several mortgage organizations. The approvals must come from:

• Federal Home Loan Mortgage Corporation
• Government National Mortgage Association
• Federal National Mortgage Association
• Farmers Home Administration
• Veterans Administration
• Federal Housing Administration

Additionally, for direct lenders to keep their licensure current and valid, they must submit to, and pass, routine state and federal auditing processes. These audits are conducted specifically to ensure that licensed lenders remain in compliance with the appropriate regulations and guidelines. To pass these audits, the lenders must retain detailed financial records and documents regarding their business.

This means that for a direct lender to obtain a license, and for them to keep that license, it takes a considerable amount of effort, diligence, and money. You know that when you are dealing with a direct lender that is licensed by the state, you are dealing with a legitimate and ethical business that has undergone scrutiny by the government. They will be professional and fair in their business dealings.

Benefits Of Using A Direct Lender vs. Indirect Lender

There are considerable benefits to working with a direct lender over an indirect lender, here are a few of the biggest ones.

1. Direct lenders only lend funds that they own
2. Communication with direct lenders is easier and more centralized
3. Direct lenders are often able to be quicker to approve and disburse funds
4. With direct lenders, your personal and financial information stays with one organization and isn’t shared with multiple companies
5. Not only can approvals be quicker with direct lenders, but they can be easier to obtain as well
6. Direct lenders can lend anywhere from $100 to $10,000 almost instantly, depending on your state

Lending Bear Can Connect You With A State Licensed Direct Lender

If you are thinking about a loan to bridge a financial gap in your life, Lending Bear can help connect you with a state-licensed direct lender in your area.