It is important to determine the difference between a payday loans direct lender and a broker – with one being able to process and fund your loan from start to finish and the other simply acting as an introducer. In many cases, borrowers prefer to work with direct lenders, so that they work with the same company all the way and know who they are dealing with, as our guide below aims to explain.
What is a Direct Lender?
A direct lender enables borrowers to apply for a loan directly with the loan provider, rather than going through a broker who acts as a middleman between borrower and lender. Payday loan direct lenders allow applicants to apply directly with them and will be responsible for providing funds to the borrower.
On the other hand, payday loan brokers will use your information to match you with their database of different direct lenders; through this, they can find the best match for your financial needs.
What is The Purpose of Payday Loans?
Payday loans are a way to access funds quickly and cover yourself for unexpected payments that may arise in an inconvenient moment.
Be it an urgent car repair or a medical emergency, there are often expenses that you just cannot postpone. For any of these unexpected expenses that cannot be covered by your existing budget, short-term solutions such as payday loans can help.
What is a Payday Loan Broker?
Many payday loan companies describe themselves as payday loan brokers. A payday loan broker is a service that connects borrowers with the right payday loan product for their personal circumstances.
Brokers can also offer advice to help borrowers understand the complex world of payday loans and the implications of taking out this type of loan. For borrowers, brokers can save a great deal of time and energy as they do the research on their behalf.
First, a broker must understand the borrower’s unique requirements: their financial profile, how much they want to borrow, what they need the loan for and how long they want to take out the loan. With this information, brokers can compare options to find the most suitable lender.
How Much Does it Cost To Use a Payday Loan Broker?
It should usually be free but the cost of working with a payday loan broker will vary between loan companies; however, they are not always a free service. Some brokers will charge specific fees for this service, a fee that will be added to the total loan amount that needs to be paid back. However, for some brokers, the lenders will incur the cost meaning that the borrower will not be charged. Always check beforehand so you know upfront whether you will be charged for the service or not.
Why Would You Work With a Direct Payday Loan Lender?
There are certain benefits to working with a direct payday loan lender. Because the loan is being provided by the lender and not outsourced, the process is shorter and therefore you rarely have to worry about delays. Additionally, working with a direct lender means that you do not have to pay brokerage fees.
Payday lending is known to be one of the most expensive ways to borrow $300 or amounts up to $2,000, so anything you can save on further costs such as additional fees will help to make the loan more affordable.
Although working with a broker can save you time and effort, it is possible to compare loan products and lenders by yourself. Thanks to legally enforced guidelines, lenders are required to display all the relevant information about their payday loans, meaning that you should be able to find all the information that you need to make a decision.
Are There Benefits To Working With a Payday Loan Broker?
One of the main benefits of working with a payday loan broker is that it expands the options available. Depending on the broker, they can help you get the best deal, be it the most competitive interest rate or the highest loan amount. Working with brokers increases the likelihood of finding a loan provider that matches your specific needs.
If you work with a direct lender, you are limited to the loan products they are able to offer. However, brokers have access to many different lenders and loan products. Additionally, they often have exclusive access to certain financial products which are not publicly available, such as very bad credit loans. It is a broker’s job to work closely with their network of lenders; as a consequence, this means that they often have access to preferential rates or loan terms.
Payday loan brokers are experts in their field. They can simplify the process of taking out a payday loan and can help demystify all the complexities of payday loans such as how much they cost, how they work and repayments.
Is it Faster To Work With a Payday Loans Broker?
Working with a payday loan broker can sometimes be a faster option than going direct. Payday loan brokers are experts in the sector and will already have a clear idea of the key lenders and how to get in touch.
From this perspective, working with a broker is much faster, as you save the many hours of research looking into who can provide the type of loan you need and comparing prices between products.
Brokers will compare different loan products and can also do the legwork of verifying lender legitimacy. Not only can this save you time and effort, but it can also protect you from any potential scams and keep you safer.
Are Payday Loan Brokers Regulated?
Just like direct lenders, payday loan brokers must also adhere to legal requirements outlined by the Consumer Financial Protection Bureau. Brokers must explicitly state that they are not direct lenders but rather that they act as a go-between for lenders and borrowers.
They will need to provide a notice on their website or in their stores to state that they are a broker and also outline the fees that they will charge. If you do come across a payday loan broker that does not provide this information, it is possible that they are not a legitimate operation.