You may be familiar with payday loans or cash advances on your paycheck, but you may not be aware that you're not getting the best deal. Most of the people running these establishments is actually an intermediary, also known as a broker, who acts between you and the person actually lending the money, and takes a cut out of the profits for their own time, increasing your overall fees. For the best rates, you will want to look into payday lenders not brokers, but are giving the loan to you directly.
Most of these loans with better rates can be found online, as it is much easier to set up one website than an entire chain of cash advance stores. You may notice most of these brick and mortar businesses are set up as chains, or franchises, with many different buildings offering loans from the same business. These intermediaries are what increase your fees.
Other than generally being online and having reduced fees, these loans work similar to other payday lenders. You will be required to vouch for your ability to repay the loan with pay stubs to prove your employment and a postdated check as a show of good faith.
A direct loan helps avoid the main disadvantage regular payday loans have, the high interest rate. With a traditional brokered loan you would find yourself paying as much as 25 percent of the loan in fees.
You will still want to do the necessary research before choosing a lender. Even though one company may boast about not having a broker you may find another company to be better suited to you. Other than the interest rate, it is also important to find out what the time limit on the repayment is. Generally lenders will allow for up to two weeks, but they will want payment promptly after your next paycheck.
Note that these loans are not available everywhere, and fall under local usury laws. Even online companies may not lend to you if it is outlawed in your area. Furthermore, in some areas the broker may in fact be required in order to get around certain loopholes in usury laws.
It is important to note that these loans are still generally at a higher interest rate than a traditional loan, due to their short-term nature. Therefore they are generally not a wise idea for use as a regular source of income.
In fact, if you have no other options and you already took out a brokered loan, you may find that getting a cash advance from a payday lender not broker will allow you to in effect cut your interest rate. It is important however to not take out more loans in this fashion than you can afford to repay. The penalties of late payment start with your check bouncing and end in a mire of penalty fees. But if you use proper forethought and a little sound financial planning, you will be able to find the loan that meets your needs.