Advantages often come at a cost and there isn’t any exception to this rule when it comes to Direct Lender Loans. Surveys and studies go to show that non-bank Direct Lender Loans – or what we shall refer to, here for the purpose of this article as simply Direct Lender Loans – stay in demand despite all the critiques writing and talking against them.
The loan borrowers, who stand in the millions alone, tend to share that the higher expense versus a bank loan is still valuable due to these main reasons:
- Completely online services of some lenders
- Services available for bad credit borrowers
- Very short term loans
- Ease of application
- Quick service of some reputable lenders
- Small loans available through mobile apps
Data when studied, tends to reveal that these reasons are able to make up for the higher interest rates and charges that Direct Lender Loans feature.
Online Direct Lender Loans
Gaining popularity by the day, Online Direct Lender Loans can be a safe and convenient option and this seems to be the biggest advantage that the loans are enjoying. Being accessible from anywhere, online loans are good for not just convenience but in the case of Direct Lender Loans, also for safety. This is easy to understand, when you notice the process by which most people tend to apply for Direct Lender Loans. When the applicant chooses a bank loan, safety is virtually a given because banks tend to be large, established entities with a presence and reputation. However, this may not be the case with other direct lenders. To understand if it’s safe to deal with a particular direct lender, one has to look at their past performance and reputability. It’s much easier to do this for online direct lenders than it is to do so for one with a missing online presence or services.
Today, the market of Online Direct Lender Loans also faces a lot of competition and this is leading to benefits for the end users too. Loan terms are getting better and the speed at which lenders respond and deposit funds is becoming faster. This is being assist with better safety standards, faster internet connections and greater back-end software that is leading to an enhanced output that is expected to only improve customer satisfaction over time.
Direct Lender Loans which skip the Credit Check
“No Credit Check Loans” are according to a lot of data, the most sought after Direct Lender Loans. Approximately 32% of the Direct Lender Loans applied for in 2018 according to a survey, were due to Bad Credit history of the borrowers.
The practical reason some direct lenders are able to skip the invaluable inputs of the credit system is simply that such loans are typically very short term in nature. In a very short term loan, the income of an individual ought to be a more valid indicator of their ability to repay, than their repayment history and their credit score management skills.
This however is also the reason why the loans remain expensive despite the competition. The expense is because the No Credit Check policy makes it a higher risk loan product. For any higher risk, a lender shall require higher returns for if things go south with a borrower, the loans stay cushioned through the interest rates earned from other borrowers, which are in totality expected to keep the business going. But as a mathematical reader may have probably understood by now, it is not a fool-proof situation but nothing in the debt market really is.
How expensive are these Loans?
Understanding exactly how expensive loans are, is something that I notice is quite rare amongst borrowers. This is not surprising when you try to compare multiple loans. Some are compounded monthly, some, quarterly, some semi-annually and some annually while the rest are not on a compound interest at all – e.g. payday loans are mandated to offer simple interest loans.
And then there is a fee that might be a constant or a percentage of the borrowed amount or a combination of the two. It does get confusing and it is hard to compare two loans until the time a borrower does the practical thing comparing the final amount to be paid in both cases.
That is definitely the advisable to do in order to compare two loans, but in general it’s quite safe to state that Direct Lender Loans can only be less expensive that a bank loan when the term of the loans are really short. In perhaps every other circumstance, Direct Lender Loans ought to be more expensive due to the greater risks involved for the lender.
When to Avoid Direct Lender Loans?
Direct Lender Loans are useful and easily available and as we all understand they tend to be on the higher side of the cost spectrum of loans, especially in the case of longer term loans. For this reason and a few others, there are times when these rather tempting loan products, need to be given a second though before being taken up. Here we share the situations that should trigger such a reconsideration:
1. When you are stuck in a debt cycle: People do fall prey of the credit system some times and getting stuck in a debt cycle is a situation that many borrowers know and understand, needs to be avoided. Yet, it does happen to some and taking any loan at this time, can be a mistake if you do not understand the system well. Some credit advisors however may be able to understand your situation and even coach you on ways to escape the situation including even taking a Direct Lender Loan such as a debt consolidation loan for it.
2. When you’re in a long term need: The high APRs of Direct Lender Loans are the way they are because they’re intended to be short term loans. If you need a long term loan, look for one with a low APR.
3. When bank loans are available and can serve you: If you’re not in too much of a hurry and bank loans are available to you, it should not be a problem to choose that option – they would tend to be less expensive. However, if what you specifically need is a very short term loan, you may have to do the mathematics to understand what’s less expensive.
4. When your credit history is great and there are other quick enough options available: There are other quick loan options out there. Some banks offer pre-approved loans to their long term customers, which are fairly quick. If credit history is not a problem in your case, you must first consider those options which may come at a lower cost.
5. When you have not done your homework on the lender: There are illegitimate direct lenders out there. There are ways to know which ones are legitimate – a simple search online and reading through a few genuine reviews, could reveal a lot. Also, understanding what fake deals and bad marketing looks like, can raise red flags and those must be taken seriously to avoid any real threat.
6. When you’re nearing bankruptcy: Since Direct Lender Loans are intended to be quick and with minimal checks and verifications, you’re the one who needs to know that bankruptcy isn’t near when you take this loan. Unlike loans with collaterals and bank loans, bankruptcy cannot be used to close these loans and the penalty of non-repayment will just keep piling up if you hit bankruptcy with such a loan still outstanding.
Loans for Urgent Requirements
Loans are available from many direct lenders who claim to be quick at processing the funds with a guarantee on approval. This does sound too good to be true but at a second glance, one may understand how this works and what makes such a claim stick at all.
The legitimate direct lenders that claim a quick service, ensure that they do not claim that the money shall be credited to the borrowers within a specified short time from their application. They tend to commit quick service in general or specify that a part of the loan process shall be complete within a committed time frame. This is a claim they can manage to stick to but keeping certain processes in place. For example, providing a guarantee on loan approval within one business hour of application may not be unmanageable when the credit check process is skipped altogether.
The other guarantee some lenders claim to make is that of approval – they guarantee approval of loans. This term typically comes with the clause that allows the lender to stipulate the minimum requirements for the loan eligibility and the liberty of discretion of the loan amount approved for the eligible borrower. This combination again, makes the claim fairly manageable in the real-world scenario.
Hence, while Direct Lender Loans are the go-to solution for many Americans with urgent requirements, no debt product can be relied completely upon for approval and deposit as many variables makes some deals fail. That said, many reputable direct lenders today, maintain a history of better approval rates of loans than banks and other direct lenders, even for their quickest loan products.
When you’re looking for a loan with no collaterals, easy application, quick disbursal and easy acceptance, Direct Lender Loans are probably your go-to option. With a little understanding of the market and some online search of reviews and past performance, it can be easy to find a legitimate direct lender. Where a bank is able to serve you exactly what you need, there is no doubt that it’s the safer and less expensive option. However, the existence and prominence of non-bank lenders revolves around everything that banks loans remain unable to serve and this is why despite the higher expense, many borrowers continue to find value in the services of direct lenders today.