A Guide to Payday Loan Direct Lenders vs Payday Brokers

Payday loan direct lenders vs payday brokers

If you have been considering a payday loan, chances are you have done a bit of research into what they are, how they work and where you can get one. You have likely come across payday loan brokers and direct lenders. Both of these work slightly differently, and it is important to understand the differences between them and compare both options in detail before making a decision.

Deciding between a payday loan broker and a direct lender isn’t an easy decision. Ultimately, it depends on what you are looking for and how much work you are willing to do for yourself. Here is our guide to everything you need to know about choosing between a broker and a lender.

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What are payday loans used for?

Everyone has experienced some unexpected situations and had to find cash during inconvenient times. Whether it’s a household emergency, like a broken oven or a car repair that you cannot postpone, these urgent costs can present problems. When you haven’t budgeted for such expenses, you will likely find yourself looking for other ways to get funds quickly, such as a payday loan.

What is a payday loan broker?

A payday loan broker is a business or individual who can help you to find a loan. They help borrowers to understand the terminology and complexities of payday loans and other financial products. Brokers are essentially there to do the hard work for you and find the most suitable payday loan for your unique requirements. A payday loan broker will discuss what you are looking for and set out to find lenders offering precisely that. They will take the time to look at interest rates, additional fees and repayment terms on your behalf.

Is it free to use a payday loan broker?

Payday loan brokers might sound like a great option as they do most of the leg work for you. However, it is important to understand that it may not come free. Some brokers may charge you a fee for their services and usually add this to your payday loan amount. Some brokers take their fees from the lenders, as opposed to the borrower, so be sure to understand if you will be charged. A payday loan broker will not be able to provide you with the loan itself, although sometimes it can seem like they are. Instead, a broker will be outsourcing your loan to a direct lender.

Your questions, answered

A payday loan direct lender is the company that is actually paying the loan from their own pocket. Direct lenders allow you to apply for a loan, and they will make a decision quickly. The direct lender will be sending the money to your bank account and will receive your repayments at the end of the loan. Using a direct lender can be a cheaper option because you will not have to pay any broker fees; however, comparing and searching for direct lenders can often take up more of your time.

One of the main benefits of choosing a payday loan broker is that they can find more options when it comes to short-term loans than you might be able to find yourself. Some borrowers are focused on getting the lowest interest rates for their payday loans, while others might want to find a loan that will lend a high amount. A broker will understand your priorities and find the best payday loans for what you need.

Payday loan brokers can have exclusive access to financial products which are not readily available to the public. Some brokers have built relationships with the lenders they work with regularly and can access better interest rates or preferential terms. Not only that, brokers are experts in what they do and fully understand the ins and outs of payday loans. They can make it clear and simple how they work, how much it will cost and when you need to make repayments.

When working with a direct lender for your payday loan, you do not have to worry about any delays. Another benefit of choosing a direct lender is that you will not have to pay any brokerage fees. Payday loans are already an expensive way of borrowing, and adding further costs on top of this can make them even more challenging to pay back. By going direct, you can cut out the middleman and save yourself some money. While a broker can compare various loans for you, comparing direct lenders is not too difficult. The FCA requires that lenders clearly display all the information you need to decide on a payday loan, so you should be able to find everything you need to know without the help of a broker.

Some individuals choose to work with a payday loan broker because they can be a faster option. A broker specialising in payday loans will already know the key lenders to look at and contact them. As a borrower, you will not have to spend hours on the internet researching different direct lenders and comparing the various payday loans available. A payday loan broker will do all the investigation for you, including researching the loans and looking into whether a lender is legitimate. They can check things, like existing customer reviews and FCA regulation, on your behalf and save you a lot of time. Some payday loan brokers can also complete application forms for you, so you have nothing to worry about other than repaying your loan when the time comes.

Scammers can sometimes pose as a broker to trick borrowers into providing financial information. Sometimes, payday loan brokers might not be scams but might not be operating fairly to consumers. A common problem with loan brokers is they do not make it clear online they are not lenders. Many borrowers have fallen into the trap of filling in forms online, thinking they are making a payday loan application. They are actually just sending their details to a broker who then charges a brokerage fee, even if they never take out a loan.

As with direct lenders, payday loan brokers are also subject to regulations from the Financial Conduct Authority, or FCA. All brokers are required to make it obvious to consumers they are not direct lenders. They must provide a written notice stating they’re a credit broker, charge fees, legal name, and details of the fees they will charge. If you come across any payday loan brokers who do not provide all this information, do not work with them. Some loan brokers continue to operate despite not being authorised or registered by the FCA. Any broker that is not registered does not need to comply with their regulations and could be potentially dangerous.

You should be aware that some payday loan brokers will require you to register for their services. When you sign up, you will be asked for your personal information and your bank details. If you do not cancel your registration within 14 days, the broker could charge you fees even if you have decided against taking out a payday loan with them. Registering for a payday loan broker can also mean your personal details are shared with third party companies. You will be required to give your permission for this when signing up, but it could result in other brokers calling, texting and emailing you about their payday loans. In some cases, borrowers have also been charged fees from these other brokers as they haven’t realised that registering meant registering for many. If you are charged broker fees that you did not agree to, you can get a refund under FCA regulations.

At The Money Shop, we are experts in short-term loans, including payday loans. We are here to help you understand the differences between payday loan brokers and payday loan direct lenders. It is essential you know all the information around both options to make an informed decision. If you have more questions about brokers and direct lenders or want to know more about payday loans through The Money Shop, you can speak with our knowledgeable staff. We are here to help you manage your finances effectively and choose the most suitable lending options for your unique situation. Our specialist team knows that brokers will be the most appropriate choice for some borrowers, while others will benefit from direct lending. We can offer you the latest advice and guidance around both options and help you to choose a payday loan that is right for you. Not only that, we offer advice on keeping yourself out of debt and managing your finances to avoid further debt.

Payday loans, either from a direct lender or a broker, are not always suitable for everyone. If you think a payday loan does not fit your requirements but you are still in need of financial support, there are some alternatives you can consider. Short-term loans are available in various types, and at The Money Shop, we and our broker partner can help you find the best solution for you and your money.

These work similarly to payday loans in that they offer quick decisions and funds released immediately, but they also provide preferential repayment options. Instead of paying off the total loan amount in one lump sum on your next payday, you can spread the cost over a longer period of time. Some people choose short-term loans for three months, or even up to 36 months, depending on the loan size and chosen lenders.

Our team at The Money Shop is here to help you choose a lending option that suits you. We will provide the latest advice on a range of different finance products to fit your individual situation.