They have often been referred to in not-so-kind terms as "loan sharks" and "predatory lenders". But fortunately or unfortunately they exist because there is a need for them. We are talking about payday loan lenders.
Critics including lawmakers, while fast to rebuke payday loan companies, have not offered alternatives. Direct lender payday loans are meant for people facing financial hardship who often cannot get a loan from banks and similar financial institutions.
As long as no alternatives are created, and there are none in the horizon so far, this industry will continue to thrive. That is, if it is not outlawed, something some quarters would love to see happen.
Contrary to popular belief, these lenders are not just for people with bad credit. Granted, people with bad credit make the bulk of their customers as there is no credit check involved. But people with good credit too do take out these loans to avoid credit checks which affect credit scores.
Another aspect that draws people to direct lender payday loans is approval rate and speed. Approval is often in minutes. Though requirements differ from company to company, virtually anyone with a job, social security number and a bank account can get approved.
If you go to a payday loan shop you can walk out with cash or a check. Online applicants often can get the funds directly deposited in their bank account the next business day.
Payday loans are not available in all states though. In some states they are either not legal or feasible
Note that there is a difference between legal and feasible. Not legal means just that; against the law. Not feasibility often means that the respective state has placed a cap on chargeable interest on loans, or regulations may be too stringent.
As with virtually everything else, direct lender payday loans have certain disadvantages. One disadvantage is, of course, the cost. Since the interest rates are high, you could find yourself in an unending cycle of debt especially if you decide to extend the loan or rollover as it is called.
Another disadvantage is that you do not decide the loan amount you get. The lending company decides what to advance you based on your income and other variables. You could find yourself getting far less than you really need in an emergency.
A company that is not a direct lender is not always a bad thing as long as it is reputable. This is because they will often be working with several direct lenders, each with different requirements, and therefore likely find one (or more) best suited to your situation.
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