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