Do you know the difference between a payday loan direct lender and a normal loan broker? There are plenty of differences between the two but the difference between these two sources is how customers are processed. When you use a normal bank or financial institution to take out a loan, it is very much the same transaction as a payday loan direct lender.
Clients go through the normal bank or financial institution and offer an item of collateral like an automobile or just some assets to secure payment for the loan. The assets most commonly offered are home equity. Once the client makes a loan with their signature as a promise to pay it back in full plus a certain interest rate the bank or financial institution legally owns that collateral until the loan is fully paid off.
A payday loan direct lender is different in that the loan comes with no obligation to use a certain asset as collateral. An example of a payday loan direct lender might be a car dealership or pawnshop that offers loans with no collateral.
Basically, a lender of loans has no real security of the money they lend and therefore an increased risk. They do not have to worry if the customer who takes out the loan will pay the interest or not. Since there is no expected repayment date or amount of repayment required, they can offer some loans of 100%, 75%, or 50% (in most states). If you are an unscrupulous lender and hope to profit as you give unsecured loans to individuals you want to harm however, be careful.
Junk loans come with higher interest rates and fees and more expensive late payment charges due to the fact that transactions like these are more risky to the lender. Loan brokers and direct lenders both take a fair amount of the risk out of the loan process by charging a little more. There are fees and interest to pay when the loan goes unpaid but these fees are much lower than a pawnbroker charge. Often, when the loan is paid off early, a customer simply pays the interest instead of the loan.
Direct lenders make their money off of the interest they charge when customers take out their loans. Loan brokers generally just make their money off of the loan fee they get paid. The direct lender, because they do not own the money and only charge a loan fee when the loan is paid off early, is able to make more money.
If you find yourself dealing with a legitimate direct lender be sure to check and see if they are registered at the state. If so then you can check their phone number, property, and any other information. The amount of business they have is an indicator of their professionalism.
Trying to receive a loan direct from an Australian registered direct lender might require you to fulfill an interview and providing information about where you work, where you bank and whether you are a home owner. The lender will look for evidence of employment and a good credit score through credit check to ensure the applicant can afford to repay the loan.
The direct lender will investigate the application submitted to them and submit it to a loan committee if they choose to do so. If this committee approves it, the direct lender can then disburse the loan directly to the applicant.
Each loan is recorded through an agency like Dun and Bradstreet or a similar agency in the country. The name of a direct lender can usually be found on such an agency’s website. However, if there is no direct lender registered then it may be listed as a broker or second loan company.
When applying for a payday loan direct borrower will need to provide a fax number, checking account information, proof of residence, and a photo identity document. If you are living a further away it is preferable to send a credit verification agency the name and phone number of a bank instead of a fax number. Although a direct lender only needs to verify your information with a fax it is not going to be required any time soon.
Once a direct lender receives the loan they will pay the adventurous loans borrower the advance amount prior to the next payday. In addition to paying their loan fee the loan fee also goes to the lender for operating costs. The fees of set up and a loan fee are not necessarily the same. Loan charges might vary from one lender to another; however, many lenders charge the same interest rate per loan. Loan fees might include an application fee, a loan origination fee, an annual fee, and maybe more.
Applying for payday loans are getting easier due to the competition of an industry. There are not many banks that operate in remittance these days. Borrowers can apply for a direct lender in the person or online. It seems to be using a certain persistence and some serious online research next time you venture into this line of work.