We all run out of cash at some point. There is nothing unusual or embarrassing about that. A sudden financial emergency might come up and our savings might not be enough to meet it. There are various ways that you can deal with a cash shortage such as that. Each method would have its unique qualities that would make it ideal for certain situations. One such method is the use of payday loans.
What is a Payday Loan?
A payday loan is a short term loan and it is taken against your paycheck. That means you will be borrowing based on what you will be getting on your paycheck and when you will be receiving it. Normally, it must be paid back on your next payday. This kind of loan is intended as a stopgap measure in case the borrower has a sudden financial need that cannot wait until payday. Because it can be processed very quickly and payday loans do not have a lot of requirements a lot of people are turning to it when they need cash quickly. Most people see it as an easy way to get cash fast.
Direct Lenders vs. Third Party Online Lenders.
Based on that information, you might think that payday loan is really the best way to resolve your cash shortage. But before you go ahead and use it there are some things that you should be aware of first before you use payday loans. One thing that you should know is that there are two types of lenders that are giving out payday loans through the internet. The first type is the direct lender and the second one is the third party lender. The second type is the third party lender.
Direct lenders are companies that actually lend the money to the consumers. A direct lender will be the one to get your application, send the money to you and process your payment. A third party lender on the other hand is not really a lender, but more of a broker. They get your information when you file your application, but they forward it to a real lender. The real lender will be the one to process your payment. Third party lenders act as middlemen between the direct lenders and the borrowers.
There might be nothing wrong with an arrangement using a third party lender except for the fact that their services cost something. Guess who will have to pay for that service? It is usually the borrowers who will have to pay for the service of the brokers. When you add the cost of the broker’s service to the payday loan, it could end up causing financial ruin for that person. Payday loans are expensive already.
Why You Should Look for a Direct Lender
Aside from the additional cost that you would have to handle if you happen to go for a third party lender, there are other factors involved as to why direct lenders are actually preferable. There is the question of security. Obviously, when you apply for a loan, you would be required to provide information about yourself. It would cause you a great deal of trouble if that information falls in to the wrong hands. When you apply for a loan from a direct lender you lessen the risk of that information being compromised. When you apply for a loan with a third party lender, more people will be handling your personal information. That increases the risk that somewhere along the line, a scammer can gain access to the information.
Another reason why it is better to go for a direct lender is because it is faster. A third party lender will just increase the amount of time spent in processing. The added time might not seem like much, but in cases of financial emergency, every hour counts.
Using a Third Party Lender
You are bound to know that you have used a third party lender. When they have forwarded your information to the direct lender, the real lender is bound by the law to get in touch with you to tell you about the terms and conditions of the law. You should notice then that the company contacting you is different from the one that you signed up with.
How to Spot a Direct Lender
So now that you are convinced that it is better to deal from a direct payday lender, your problem now is how do you spot one? How can you tell that you are dealing with a direct lender and not with a third party company? That is not as easy as it sounds because in some cases third party online lenders will not say outright that they are not direct lenders. Because of that some lenders unknowingly get their services, adding to the cost of the loan.
If you have to use a payday loan, it is considered safer to go to a brick and mortar office of a lender than to go online. That is one way that you can be sure that you are really dealing with a direct lender and not a third party firm. But the attraction for applying for a loan through the internet is real and it cannot be denied. It really is a lot more convenient to do it that way.
One simple way that you can get a direct cash advance lender is by creating a search on Google or some other search engine using the term, “direct payday lender.” You don’t need to check all of the results but most of the sites that would come up on the leading pages should be good candidates. But your search should not end there. Visit the site of the lender and get as much information about their services that you can. Get their contact information such as phone number, email address and the physical address of the business.
When you have the toll-free number of the company, call it and ask questions to the representative and get confirmation that they are a direct lender. Check the terms of their products and make sure that it is stated on their site that they are a direct lender.
Checking the License and Reviews
A payday lender is just like any other business and so would require having a license from the state in order for it to operate. You can check with your state’s Department of Commerce if they do have a license to operate as a payday lender. You can also check with the Better Business Bureau for their rating. The internet is also filled with reviews about companies. You can look around for reviews of payday lenders, but be sure that you are looking at real reviews and not just paid reviews that have no meaning.
If you know anyone who has used payday loans before you can ask if they can recommend a direct lender. There are many ways that you can be sure that you’re dealing with a direct lender and not a broker.
The Use of Direct Payday Loans
The bottom-line is that if you ever find yourself in a situation where you want to use a short term loan, you just have to make sure that you are dealing with a direct lender. But even when you are borrowing from a direct lender, a payday loan can be very expensive. It can be costly to the point where its use is prohibitive.
Payday loans can charge $20-$30 for every $100 borrowed in a period that could last from two weeks up to a month. When you compute such interest annually, that would place payday loans as the most expensive financial products in the market, even costlier than credit card cash advances. This is the reason why consumers are being warned about using payday loans. Even if you do find a direct lender, you might still end up in trouble.
Government agencies and personal finance experts recommend that you use alternatives for getting the money that you need over the use of cash advance loans. The best thing that you can do is for you to fix your finances so that you will have enough savings set aside to handle any kind of financial emergency, but in the current situation where most people are living with low income that might not always be feasible. There is also the choice of getting a cash advance from the employer, but most large companies would not have that option for employees.
Another option is for you to try borrowing personally from people that you know. That is a much simpler arrangement without any need to worry about interests. The problem is that your friends might not have the kind of money that you need.
There might really be a moment when using a payday loan is the only viable option for you. If you happen to find yourself in such a situation, just make sure that you are dealing with a direct payday lender and not a broker.