Payday Loans Direct Lenders

How did Payday Loans come into existence?

This is an important question to discuss, as there has been a serious amount of debate circling these pay day loans. It has been noted that pay day loans have become increasingly popular in place of regular conventional loans and other forms of credit, before discussing why this trend is here to stay, it is essential to know the history behind these pay day loans.

 Pay Day Loans gradually took shape in the 1990’s, although they have been in existence since the 1800’s, and start finding customers in the mid segment class of society, people who did not have access to other forms of credit, such a credit card, or other mortgage loans. The criteria for these loans was fairly simple, as it reached out to people irrespective of their past credit history, as long as they had a source of income. These loans saw a tremendous growth during the 2008 recession, as many people were looking at these loans as a supplement to their income, since the banks have restricted their lending capacities.

The payday loans direct lenders have known to be far more reliable than mortgage brokers as they serve as a direct lending source in contrast to brokers as they serve different sources. The main difference between mortgage brokers and direct lenders is the fact that brokers are fully responsible for the loan, whereas in the case of a direct lender, there are 2-3 people within the structure who are responsible for the approval of the loan. The difference in the fees may various in terms of half or a quarter percentage points but if calculated over a period of time, it makes a significant difference to the entire amount.

One disadvantage that payday loan direct lenders can face, particularly in the case of a property purchase is the fact that brokers are not licensed in all states whereas direct lenders usually ensure their licensing in all the states.

How to improve your credit rating:

It is extremely important to consider your credit rating before you go in for a loan with payday loans direct lenders. The process of checking your credit lending is fairly simple and one should be in a habit of doing this, because as important as it is to find a responsible lender, it is equally important for you to be a responsible borrower. Let us discuss this in simple steps:

·        Checking your credit file on a regular basis shows you whether your credit file is accurate. Sometimes your record might not have been updated and you are entitled to correct your record.

·        The most important step is to pay any outstanding debts before taking another loan. Not doing this can lead to a vicious cycle of debt which can prove to be detrimental in the long run.

·        If you think that your credit rating is borderline and still feel the need to apply for a loan, you must raise this issue with the lender. This demands a certain amount of credibility from the lender, as he feels you are a responsible lender.

·        If you feel your credit rating is poor, it is always advisable to delay your loan application and focus on paying off your earlier debt.

Criticism against payday loans direct lenders:

Pay Day loans have known to be notorious for their high interest rates, although there are alternatives to these type of loans which have known to offer interest rates as low as 29% APR, but a majority of these lenders have known to be functioning without any regulation which has seen lenders offer APR’s as high as 4000%.

·        The biggest disadvantage customers are facing when it comes to these loans is their easy access to loans. Many of these agencies are lending loans with an approval over a text message, which has led to a vicious cycle of debt.

·        There is no rigorous check on the credit rating of the borrower, which means that there is no credibility when it comes to the borrowing capacity of the customer.

·        There has been no cap in the borrowing limit of the customer, which means that the customer can borrow an amount without being strict about the repayment of the previous loan.

·        Rollover loans, more than anything else, need to be most regulated, as the interest rates keep climbing up which could lead to a much larger amount to be repaid at the end of the time.

Borrower Responsibility:

·        The borrower has an equal responsibility when it comes to payday loans direct lender provided loans. They need to do a certain amount of research about the practices adopted by the lending agency they are looking at, and make an informed choice.

·        The borrower needs to question why he requires a pay day loan, and only in the case of an emergency should these services be used and not to meet your regular day to day expenses.

·        It is important to consider how transparent a company is in revealing their hidden costs and other expenses, before jumping into one of these loans.

·        A customer should ask for the total cost of the loan, before taking it which would include the APR they will have to pay at the end of the repayment period.

Are brokers a better option than payday loans direct lenders?

There has always been a certain amount of confusion when it comes to which option is better. Although brokers can make the overall process easier by taking care of the entire procedure, payday loans direct lenders are known to be more reliable as you are dealing with the direct source of the fund. With brokers, you are not aware of the costs involved and could result in you paying more than you are supposed to. Direct lenders also tend to be more transparent, as they work towards building a stronger association with their customers.

If you are looking at more products and a more personal relationship with more time devoted to you, this serves well as direct lenders have teams dedicated to guiding you towards more financial stability.