There is nothing unusual about running short of cash. It can happen to anyone and it is not something to be embarrassed about. A sudden cost that could come up is not something that you might be ready or prepared for. There are several ways that one can handle such a financial emergency as that and all methods have their upsides and downsides. One method which has been gaining a great deal of following lately is the use of payday loans.
Payday Loans Explained
If you do not know that much about payday loans then you could be missing out on a great deal. It is a kind of short term loan where the paycheck of the borrower is used as a form of security. The lender would give money based on the amount that is to be received by the borrower and it is supposed to be paid back on the next payday. It has become popular in the past few years because of the ease by which one can get this kind of loan.
It is easy to get payday loans today because of several reasons. The first one is because most lenders now operate through the internet. If you want to become a borrower then all you have to do now is to go online and visit their website. You can file for a loan right from the website itself. There is no need for you to file the application personally. There is also no need for you to fax in documents. Another reason why it is so easy to get a payday loan is because it does not require the same kind of credit check that is used by banks and other lenders.
Most payday lenders can now process loans within the same day that the application was filed. Some even claim that they can do it within a few hours. These qualities are the reasons why so many consumers are turning to cash advance loans whenever they encounter problems.
Direct Lenders vs. Third Party Online Lenders
Like any other financial product, there are a lot of things that you should know about cash advance loans before you use it. Lack of knowledge could result in misusing the loan and you could end up in even more trouble than before. One of the things that you should learn about payday loans is the kind of lender that you will be choosing to borrow from. There are two types of payday lenders out there and you should be aware of the distinction between the two. The first is the direct lender and the second is the third party lender.
A direct lender is an actual payday lender. It is the company that runs the website or the office from which you will be filing your application. That is the same company that will lend you the money and will be the one to process your payments. A third party lender on the other hand is not really a lender but more of a broker or a middleman. It is a company that acts as a bridge between the borrower and the lender.
A third party lender will have its own website where consumers can apply for loans. The loan applicants would provide their personal information and the broker would then send the info to the actual lender. The real lenders will be the one to process the loan and send the money. By then the process of the broker is done, and they get to charge a fee for the service, which is basically facilitating the processing of the loan.
The problem with third party lenders is that most of the time, people are unaware about their true nature of the company that they are dealing with. Some borrowers think that they are dealing with direct lenders only to learn later on that it was to a broker that they gave their personal information to. The added process can increase the processing time and in short term loans, the speed of the processing is crucial. Then there is the question of the fee for these payday loan brokers. The lenders will not shoulder those fees but it is passed on to the borrowers. That further increases the already steep cost of payday loans.
You are bound to know if you were unfortunate enough to deal with a third party lender. Once they have forwarded your information to the actual lender, the direct lending company is bound by law to inform you about the terms and conditions of the loan. At that point you should be able to tell the difference between the company that you initially got in touch with and the company that contacting you now.
Spotting a Direct Lender
If you are convinced that using a payday loan is the best move for you, then you aim should be to spot the difference between a direct and a third party payday lender. How do you tell if you are dealing with a direct lender? What are the signs that one should look out for? Not paying attention to those could increase the overall cost of the loan for you.
If you want to be absolutely sure that you would be able to stay away from third party lenders then the best move that you can do is not to get the loan online. It would be better to apply for the loan at the brick and mortar office of a lender near your place.
But staying away from online payday loans is going to be hard. After all, that is one of the main attractions of the product. It makes it so easy and convenient. Now you just have to be on the lookout for certain signs on the websites of the lenders to see if they are real payday lenders or just brokers.
The simplest way that you can reach a direct lender is to create a search on a search engine using the keyword, “direct payday lender.” You will be getting more results than what you can actually check. But it does not mean that site that came up on the search result can be trusted right away. There are still some other things that you have to check. You have to pick some lenders that are promising, go through their sites and get as much information about their company and the terms and conditions that they have.
You should get their contact information, preferably a toll-free number and then call that number. You should get an assurance and confirmation from their representative that they are direct lender. Another simple thing to do is to look through their site for a statement that they are a direct payday lender.
Other Things You Could Check
There are other things that you can check in order to be sure that you are really dealing with a direct lender. You can check with the local authorities concerned if a lender is actually licensed. The Better Business Bureau is another authority that you can check, this time you can see the BBB’s rating for that particular lender.
Don’t forget that since many payday lenders are operating as online businesses, there should be plenty of reviews that are available on the internet. You should take advantage of those and find and read as many as you can. You should be on the lookout for those paid reviews. If you notice that a review is just all praises then that should be a warning sign for you already. You can also ask people that you who has used payday loans in the past. They can give you some recommendations based on their experiences.
Using Loans from Direct Lenders
The long and short of it is that you have to make certain that you are dealing with a direct lender at all times. The truth is that even when you are dealing with a direct lender a payday loan can still be very expensive.
A cash advance loan can have an APR of 400% or even higher if you happen to live in states where there is no law regulating that kind of lending. That means it is never going to be easy to pay it back. The fact that the term for the loan is very short further complicates the problem. It would be very easy for you to miss payments for the loan.
Experts from the private sector and the government give out recommendations on how you can avoid having to use payday loans. They say that the best thing that you can do is to get your finances in order so that you will never be forced to borrow from lenders at such exorbitant interests. There are other financial products which you can try as well. These products might not be as easy to get as a cash advance loan but their long term effects would be less harsh and a consumer would have an easier time paying them back.