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A direct lender works directly— as the name suggests. The main function of a direct lender is that it cuts the middle-man out and provides all loan services in-house. This involves everything from studying your credit to processing the final check. There are a lot of reasons to use a direct lender when you need a loan. Maybe you’re looking for a mortgage, a loan for a new vehicle, or maybe like a lot of people, you’re just in a jam and need a quick way to get your bills paid.
If you’re stuck in a cycle of debt, and unexpected emergencies come up, we know that it can be hard to make ends meet. A direct loan is one option, though it isn’t right for everyone. It’s natural to be confused if you’ve never worked with a direct lender before. Here a few FAQs to help clear your queries and become an informed consumer.
Direct Lender FAQs
A good way to understand how loans with direct lenders look is to read through the answers to some common questions.
What Are the Benefits of Working with a Direct Lender?
The biggest advantage of working with a direct lender, as opposed to a broker, is that you know who you are working with. Your information goes to one company instead of being passed along to other companies that want to make loan offers to you. Even so, read the lender’s privacy policy, since companies differ on what they do with your information.
It’s also a lot more convenient than having to go through loan matching services and waiting for them to find you a service provider. To work with an online direct lender, all you need is an internet connection and your relevant documents. The process can take only a few minutes to complete, and approval can be faster than with non-direct options.
What Will I Need for A Direct Loan Application?
Direct lender loans typically have a very simple application process. Here are the few things you need to have on-hand when filling the application.
- You must be 18 years of age or older
- Social Security Number
- Driver’s License
- Employer Information- this includes employer name and number, pay frequency, and monthly income.
- Home address
- Phone number and email address
- Bank account information (routing number and accounting number)
How Is a Direct Lender Different From a Payday Lender?
Many direct lenders are installment lenders. This means that their loans, like auto loans or mortgages, allow repayments in installments. A responsible lender will only give you what it thinks you can pay back, but check the numbers yourself.
On the other hand, a payday lender will ask you to pay interest and full loan principal amount all at once. This usually puts a lot of strain on borrowers and they usually end up reborrowing just to pay the loan back. As you can see, it’s usually a tactic to trap people in a cycle of debt. They are specifically designed to make them extremely difficult to pay back.
How Much Is the Monthly Payment?
The monthly payment is usually dependent on the loan amount. Most trusted direct lenders will alter the loan amount and payments to fit your budget and allow you to pay back your loan without the need to reborrow.
Does a Direct Lender Report to Credit Bureaus?
Many direct lenders report payment history to at least one of the three major credit bureaus, but not all of them do, so ask first. When a lender does report, you can use that payment history to help build or rebuild your credit, which usually isn’t the case with payday loans.
When on time payments are consistently reported to credit bureaus, no matter what kind of loan, they can help your credit score over time.
What Makes An Installment Loan Different
Compared to a payday loan, an installment loan from a direct lender gives you more time to repay and a set schedule of payments. That can help you stay out of a debt cycle, but only if you borrow an amount you can pay back.
Before you apply, check that the lender is licensed in your state, and ask what the loan will cost in total and how long approval and funding will take. If you have more questions, get them answered before you sign anything.