Payday loans are a quick, convenient way to see you through to your next wage. They are usually ‘unsecured’ and require no collateral – making them an attractive financial solution. There are plenty of providers to choose from on the market, all offering a variety of products and services to suit your needs. However, when searching for a loan it is more than likely you will come across a broker than a payday loans direct lender – but can you tell the difference?
Payday loans direct lenders vs. brokers
If you need a loan to tide you over, you will likely consult either a direct lender or a broker. A payday loans direct lender is a company who will deal with your application direct and will fund the loan to you personally if you are successful. There are usually no application fees, and they must be authorised by the Financial Conduct Authority who regulate the financial services industry, keeping it stable and protecting consumers. Brokers may however sometimes charge a fee, as they act as a middle man between the consumer and the lender. When applying for a loan through a broker website, the applications are sold on to direct lenders, who will then decide whether to fund the loan or not.
Benefits of using a payday loans direct lender vs. a broker
In order to provide loans, direct lenders must first be approved by the FCA. This means consumers are protected, and the company must follow a specific set of rules and guidelines. In 2014, the FCA implemented a cap on interest rates, meaning borrowers will never pay back more than twice what they borrow. Using a broker is usually a good move for consumers who wish to get an offer from a variety of providers without doing the hard work themselves.
What to look out for
If when you are applying for a loan, the company identify themselves as a ‘loan providing service’, this generally means they are a broker. FCA regulations also mean brokers must make it clear that they are brokers and not a direct lender. Be aware of loan providers who promise to approve a loan before the application process is complete as these could potentially be fraudulent companies. Also keep an eye out for a company address and contact details, as fraudulent companies tend to use a PO Box number.