Payday Loans

Direct Lenders Vs. Third Party Online Lenders


The Basics of Borrowing Money Online and the Companies That Offer These Loans

The basics of this type of loans are that it is all done online, and there is no paperwork to fill in. They can be secured and unsecured and they can be offered to you directly, or via a third party. There are a lot of reasons as to why it is more advantageous to get cash from a moneylender directly instead of a third party loan specialist. The biggest reason is the safety of your personal data, which is something that you need to be cautious about when applying for one of these loans.

So What is The Difference Between the Two?

Loan RepaymentMany people are often confused by the difference between a direct money lender and a third party money lender. To put it simply, a third party lending company will act as a go between, and they will pass on the details you provide them to other companies, whereas a direct lender will only deal with you directly. The disadvantage with third party lenders is that you can never be sure how secure your personal info is, and who is able to access it if the company doesn’t provide an application on a secured server. So it is more practical to deal with a direct lender rather than a third party lender with no ssl certificate for no other reason than to have a better chance of keeping your personal details safe. In this article, we will be taking a closer look at some of the similarities and differences that set apart these two types of lending companies.

Direct And Indirect Lending

When applying to a lender who deals with you directly, as soon as you have finished filling out the application form, then you know that your personal data is not going to be passed on to many other lending companies. Whereas, if you give your personal details to a third party lender who doesn’t provide a ssl application, you will have no idea which other companies or individuals will have access to your personal data. This is something that could be putting you at a higher risk of having your identity stolen.

Security And Licensing

Another aspect that should make you favor the services of a direct money lender over a third party lender is that you will be able to spot if their website is secure if they are displaying any marks that suggest that they are licensed by the state to provide these types of loan. This is in contrast to using a third party lender, who may be passing on your personal information on to any company that is not licensed, or has an unsecured website.

What They Expect Oo You as A Borrower

To begin with, the lender will require from you a confirmation of your salary and whether you have a checking account with a mainstream bank. You may also find some lenders that do not even require this info. When they have confirmation that you have the income to qualify for one of their loans, they will then give you a loan, with a repayment date that fits in with the day of your next pay check.

Once you have accepted the terms and conditions, then you will find that some of the lenders will put the money into your checking account within an hour to a day. You will be expected to repay the loan on time, and not just the amount you applied for, but also the interest rate amount and any fees and charges that have been added on top by the lending company.

Repaying the Loan and Avoiding Repayment Problems

For the most part, repaying the loan is simple, with the money being taken from your bank account via electronic transfer. This is the same way that you would have received the money in the first place. If you have gotten your loan by visiting a lender’s store, then you may be required to visit the store and either pay by cash, debit card or by check. You may also be asked to provide a post dated check at the point of application. However, this is gradually being phased out, and not many lenders ask for this method of payment anymore.

The problem with these loans is the short length with which they must be repaid. This can catch out a large number of people, and leave them in financial difficulties. If you think that you would be unlikely to repay the loan, then you are allowed to ask for an extension to the repayment date. This will, however, incur more on time charges, and is something to be avoided if at all possible.

The Consequences Associated with Failing to Pay Back the Loan

It is not a good idea to fail to repay this type of loan, as the penalties can be harsh, and you will be pestered by debt collectors by phone, letter and worse, by personal visit. This could also mean visits to your place of employment. Other problems include extra charges, debt collection fees and legal fees if the lender is taking legal action in order to reclaim the cash you owe. Not only that, but repeated attempts to cash a check by the lender, when there is not money in your bank account, could incur charges for bounced checks by your bank. This will mean that you have even less money in a month or two time.

In addition to these, some of the debt collection companies that these lenders use in order to get their money are not entirely friendly in the way that they conduct themselves. They can be quite aggressive and forceful in the way that they treat debtors, and this is something else that you need to understand before taking out a loan of this type.

New Rules and Regulations for Payday Lending Companies

The attached expenses that lenders add on to their loans is one thing that is attracting the attention of certain government agencies, due to the fact that they are seen as being unfair and penalizing poor people. Currently, there is no restriction on the number of times that a lender can lengthen a pay day loan. But now, there are plans being made to limit the amount of times that a payday loan repayment can be delayed. The good thing about a limit to the number of times that a payday loan can be rolled over is that there is a limit to the amount of times that a lender can add on payment extension fees.

Are There any Other Options?

If you own your own home, then you could be able to release some of the value that is tied up in your home. This is called equity release, and it is currently one of the most popular ways in which to obtain money to cover the expenses of a sudden emergency. This is obviously a secured loan, and your home can be at risk of foreclosure if you do not keep up to date with the repayments. So, this is something that you need to think about long and hard. Weigh up the pros and cons of this method of raising cash, and make sure that you are able to meet the repayments, prior to putting your home up as collateral.

Getting a Pay Advance from your Place of Employment

One way in which you can avoid going to a pay advance company is by asking your manager for an advance on your next salary check. Dependent upon your employer, this may be a smart alternative to a payday loan. Not all companies will be so keen to offer this, but there is no harm in asking. In the end, if all goes well, this could save you a lot of money in interest payments.

Finding the Online Loan

Best deal on loansTypically, a pay day loan is taken out to cover emergencies, and the reimbursements are withdrawn via the checking account of the indebted person a day or two after their next pay check turns up. Therefore, the interest rates are going to be high, as well as confusing, given the fact that the interest rates on short term loans are more often than not, disguised as a fee, rather than a percentage.

It is not until you look more closely, that you will soon discover that in actual fact, the APR of the loan is huge. Just looking at the APR, you could actually be paying double or more of your original owed amount. That is why it is not advisable to settle on the very first loan that comes along, as you may end up with an even higher rate of interest.

It is a given fact that these type of loans are going to come with high interest rates. That is just something that you have to accept in order to get a loan when you have a bad credit report or low credit score. However, that does not mean that you should not look around for a good deal. Due to the fact that there are many online loan companies to be found on the internet, competition for your custom is now quite fierce, meaning rates are coming down. Albeit, very slowly.

The Bottom Line

As you can see, there are a lot more advantages to getting a loan from a direct lender over getting one from a third party lender. If for no other reason than making sure that the data that you give to them, like your name, address, charge card numbers and bank account details, are kept safe. You really do not want such sensitive data to be lost somewhere where you do not know where it is. Therefore, it’s of utmost importance to make sure that the third party lender offers a loan application on a secured server. This way you may rest assured that your sensitive personal data is safe.

There are a number of bad consequences to losing your personal data, and the worst of these being that your identity could be stolen. This could have dire consequences for you and there is less chance of you ever getting a clean credit file any time in the immediate future. Looking after your finances and personal information should be your main priority if you want to steer clear of some of these online lenders in the first place, and making a few changes to your life is a good place to start.