Which Type of Payday Loan Lender is Right for You?

When you take out a payday loan, you likely require cash fast. But be careful not to commit to a loan before knowing about the payday lender. There are different types of payday lenders. Each one can offer a different product, require different application steps, and have different terms and fees. It is important to review the various lenders before agreeing to a payday loan so that you can find the lender that best suits your needs.

Types of Payday Loan Lenders

Direct Lenders

Not all payday lenders directly provide funds, even though it can be hard to discern. When you apply with a direct lender, your loan essentially stays “in house”. The company you apply with will oversee your loan from your application to repayment. The same company that loans you the money services your loan, no third-party or intermediaries are ever involved.

Working with only one lender or company is convenient, as you need only submit one application for loan consolidations. However, that means that you will only have one lender viewing your application and you will only get one offer. Additionally, while direct lenders are very upfront with their timeframes, the process can be a bit slower.

Matching Services

A matching service is a company that assists the consumer in finding a direct lender. They are a liaison between the borrower and the lender. They receive the application from the borrower and send it out to one of the many direct lenders they have a relationship with. This could be hundreds of lenders. This is beneficial because instead of you having to submit your application to a different direct lender after a denial, the company can do it for you.

The matching service can make securing funds much easier and quicker. You only need to fill out one application, usually online, and the company will forward it on to their various vetted direct lenders. This also improves your chances of securing a payday loan. A good example of a payday loan matching service would be GreenStarCash. They allow you to apply for a payday loan and get matched with a lender completely online, as well as let you find the nearest payday loan location in case you prefer to apply in-person or get your money ASAP.

However, this means that various direct lenders will have access to your application information as it does not remain only with the matching service company. Additionally, the matching service may not have detailed information about the timeframe of the loan process and when you can expect your funds.

State Regulated Lenders

State regulated lenders are lenders that operate and are overseen by each state’s government in which they offer payday loans. Payday loans are not legal in all 50 states so where you live determines your access to a state regulated lender. If one is available to you, you can be confident that their fees, terms, and rates won’t exceed the state regulations.

Tribal Lenders

Tribal lenders are lenders that work to secure funds through affiliating with Native American tribes. Tribal lenders may not have strict application requirements and generally, anyone with a consistent source of income is eligible for a loan. Also, tribal lenders may be more lenient on repayment, allowing you to take longer to repay your loan.

However, they consider themselves sovereign nations, which means they don’t operate under federal or state payday laws. The borrower, therefore, isn’t as protected and may be subject to higher fees and interest rates.

Offshore Lenders

Similarly, offshore lenders are not held to state or federal payday laws because they operate outside of the US. While you may be able to secure a larger loan amount than possible within the US, you may also be subject to higher fees and rates.

Credit Access Business (CAB)

As the name implies, this is when a business secures a loan for a consumer via a third party. These credit service organizations (or CSO’s) are businesses registered with the state whose job is to seek funding for a consumer. You apply with the CAB and if you are approved they work with a lender for you.

It can be beneficial to have someone work on your behalf, and as they are state registered you can usually trust them with your information. However, your private information is not kept entirely with the business. Additionally, as they will be servicing your loan they may charge fees in addition to interest.

Which Lender is Best for You?

Typically it isn’t a good idea to go with the first lender that approves your application. Instead, do your research and read the fine print. Different lender types operate differently and can have different effects on you as a borrower. Choose the lender who you feel most confident in, in terms of keeping your information safe and securing you funds.

Dorian Koci

Dr. Dorian Koçi is a historian, Director of National Historical Museum of Albania and lecturer in Tirana State University, Faculty of History and Philology and New York University of Tirana.