Which Is Better? A Direct Lender Or A Broker?
While it’s common knowledge that payday loans can be very expensive, some borrowers simply have no other options due to having a poor credit history or lack of employment. Payday loans can provide a quick and easy solution for borrowers who can’t get approved for a loan elsewhere. That being said, borrowers should seek out direct payday lenders as opposed to a broker. Much like they would when shopping around for a mortgage loan or insurance policy. This helps to avoid excess broker fees and your sensitive information distributed to unknown parties.
Five Reasons To Consider A Direct Lender and Not A Broker:
- Working with a loan broker will often cost you more. There are really no two ways around it. Brokers will often charge a fee when they provide customers to lenders. It’s just how they make money, and it’s a business after all. To make up for the cost of the lead a direct payday loan lender is probably going to pass that fee along to the customer. This means the already high rates attached to a cash advance are going to be even higher for the borrower. Brokers are also able to get around state laws which cap interest rates through a variety of loopholes. For example, they match borrowers with direct payday loan lenders in other states that don’t have rate caps. Another option is a company who operates on Indian reservations or other offshore locations. This means brokers are typically working under different rules and regulations. Compare that to a neighborhood lender who you meet face to face. Borrowers can wind up with alarmingly high fees and other unexpected costs when they don’t work with an actual lender.
- Borrowers open themselves up to unwanted marketing when they go through brokers, particularly if they’re applying online. Once a potential borrower submits personal information to a broker, he or she is then publicly identified as someone who wants to work with a direct loan lender. Brokers in the payday loan field have relatively weak privacy policies, and most of them have the right to share borrower information with just about anyone. This can include a tax preparer, car dealerships, and others. Borrowers need to be aware of this and know that they’ll likely be hit with sales calls, marketing emails, and unwanted solicitations by mail once they’ve applied for a direct lender loan through a broker.
- There is little if any accountability and transparency when you work with a broker. When working with direct payday lenders, rates are almost always clear. They’re generally displayed upfront before the borrower applies for a direct loan or submits any personal information. In addition, direct loan lenders are usually upfront with the exact loan terms, and customers can always access important information for the lenders, such as company addresses, phone numbers, and emails. Direct loan lenders also tend to be affiliated with certified payday loan trade groups that are required to conform to best practices based on the state that they’re operating within. Most of the direct lenders listed in our directory have an active license to provide same day cash, either on a state of Federal level. Brokers, on the other hand, typically aren’t accountable for much, and there’s rarely any transparency about the rules and regulations under which they’re operating. After all, they’re not the actual lender, so they can get away with not being transparent. When borrowers stumble upon a site for payday loan brokers, one of the biggest giveaways that the brokers aren’t direct lenders will be if the site requests personal details and financial information from borrowers prior to displaying any rates.
- Marketing or lead generation sites are often misleading. Non-direct lending sites are often designed to look direct lenders. These are usually the sites that crop up at the top of the list in an online search. Borrowers need to make sure they’re reading the fine print when they visit these sites because many of these brokers are purposely trying to look like direct lenders, when in actuality, they’re simply the middlemen. Their job is to sell the customer’s information off to whoever bids the most, and once that information is submitted, it’s up for grabs.
- Some 3rd party companies and non direct lenders will commit fraud. Unfortunately, fraud occurs in the payday lending space. This doesn’t necessarily mean that brokers themselves are advocating fraudulent practices. But because they’re not heavily regulated like direct payday lenders, anything can happen. When borrowers apply for online loans or cash advances, they’re asked to submit bank account information and other personal details. Most of the time, this information is going to various online payday lenders. But occasionally it can wind up in the hands of fraudulent buyers who claim the borrower took out a direct lender loan. At this point the borrower’s bank account can be cleaned out. If a marketing company is asking for bank account information online, it’s likely not worth the risk.
Borrowers should always be leery of lead generation sites and companies in general that want to market your data to the highest bidder. They should specifically watch out for companies that ask for personal information before disclosing loan details. Certified lenders who are transparent and upfront about their fees, rules, and regulations are the safest bet for acquiring a payday or installment loan. Make yourself familiar with state laws and government regulations. Understand the interest rate caps and other limitations that come with a short term direct lender loan. Having knowledge of financing rules is a great way to avoid paying unwanted fees and, in many cases, getting scammed.