Choosing a Loan Provider
Choosing a loan provider can be a difficult task, especially when you’ve encountered an emergency expense and aren’t sure where to turn. Although you may be in a hurry to obtain funds, it’s important to take the time to weigh your options to ensure you’re making a wise financial decision that doesn’t cost you more than you can afford.
You should make an educated decision on what you can afford to borrow, how you will pay it back and how much it is going to cost you over the term of the loan. When choosing a loan provider, you should always ensure you’re borrowing from a qualified lender to protect your rights as a consumer.
Different loan providers offer different products; be sure to do your research to ensure you understand the state laws that apply, whether the lender has physical locations or has an online presence and whether they are a so-called matching service or a direct lender.
The first decision you have to make is whether you want an online loan provider or one with a physical presence.
Online Loan Providers
If there are no in-store lenders nearby, or you simply do not want to commute to a retail store and need a small loan as soon as possible, then online payday loans or installment loans may be the best option for you
Utilizing an online loan provider often allows you to avoid many of the hassles that come along with traditional in-store loan operators. Many online lenders don’t require you to fax or mail any documents to gain access to the money you need – hence why many view this as the ‘hassle-free’ way to apply for and obtain a loan.
Online loan providers are finding ways to offer the same benefits and sense of security as in-store lending (i.e. providing a personal touch) to help borrowers get comfortable with the online lending process. Many online loan providers now offer virtual assistance via online chat and a phone number to call for additional information, making the experience quick and easy, but also safe.
Be sure to exercise caution when using online lenders – do your research and look up the ratings and reviews of the online lender on third-party review sites, and read reviews by other borrowers to help you get comfortable with the particular online loan provider you are applying to.
In-store Loan Providers (Brick and Mortar “Retail” Resource)
Some people are still more comfortable going into a physical store and speaking with someone directly. This approach is particularly helpful to those borrowing for the first time and/or those who prefer to interact directly with a representative of the lender at a store-front location before agreeing to the terms of a loan.
In-store loan providers may still be more attractive to some because of potential uncertainty over the privacy and security of their personal information and other perceived risks of online lending. While these can be legitimate concerns, many lenders’ sites have data security certifications and if you apply for a loan with a licensed online lenders, the lender must work diligently to adhere to payday/short-term lending laws, privacy laws and any other applicable federal and state legislation.
Make sure you take the time to make sure you’re speaking with a reputable company.
You can also apply for a loan over the phone if you’d like to speak with someone directly without having to visit a store. This is a great option for those who would prefer to connect with a person throughout the lending process and ask some questions and/or those who are not comfortable providing personal information online.
The great thing about applying over the phone is that you have an opportunity to discuss your options and to determine how different products offered by the lender may fit your circumstances. You can ask questions about the differences between payday loans, installment loans and personal lines of credit to ensure you’re looking at the right financial product for your situation.
Direct lenders vs. Loan-Matching Services.
While you are researching the right lender for you and ensuring they are a good fit and legitimate, it is also important to make sure you understand whether the loan provider is a direct lender or a so-called loan-matching service, or third-party aggregator.
The difference between a direct lender and a loan-matching service is that a direct lender lends you the money themselves, whereas a loan-matching service is a middleman. To be more specific, a third-party aggregator is a company that collects your personal and financial information, and then shops it around to lenders who may be interested in offering you a loan. It’s important to understand the difference between these two to ensure that you know who you are ultimately working with.
Another key element to remember when researching loan providers is that different providers are licensed to do business in different states. It is important to look for the state in which you reside in; usually you can find this on fairly easily on the lender’s website. For retail locations, this isn’t as much of a concern since storefront locations will be licensed operations, but it is important to look for your state on the website of an online loan provider to avoid any confusion over state laws and regulations.
Rates and terms can differ greatly depending on the state, so it’s important to understand that each loan is different. Most state-licensed lenders will have a list of rates and terms on their website, which will include detail on their state license itself. When you apply for a loan with a reputable lender, you will be asked to choose the state you reside in to ensure all state laws apply. If you are not asked these questions by your lender, it may be best to look for another lender to ensure the right precautions are being taken before you agree to a loan.
Once you have found a lender that adheres to the proper regulations of your state, it’s time to ensure you understand the fine print.
When you apply for a loan or line of credit with a reputable lender, you will be asked to review and sign a loan agreement which details the terms of the product for which you have applied, as well as all fees and interest chargeable to you under the agreement. If you have any questions or concerns during this process, pick up the phone and call your loan provider.
In summary, the key is to ensure you are borrowing responsibly. To do so, make sure that the loan you are looking at meets the following criteria:
Licensed – Make sure that your loan provider is a state-licensed provider that follows all applicable federal and state rules and regulations. Understanding your loan is extremely important, which is why you should always borrow from a reputable lender that adheres to applicable laws. Again, check back to ensure they are licensed – you will also receive a very detailed loan agreement entailing term of loan and other requirements. When you borrow from a licensed lender, you have access to the resources you need to understand your loan such as (in the case of an online lender) a website that describes the product structure, a contact to reach out to with any questions, and confirmation of your loan details.
Secure – You have to be able trust your loan provider to protect your information in accordance with industry standards. Rest assured, if you choose a reputable lender, once your information is stored within their database, they will have the necessary physical and logical security measures in place to keep your data secure. For example, for online lenders, you may want to check that secure socket layer (SSL) encryption is used to help keep your information safe and secure.
Accessible – Short-term loans should be all about simplification and convenience – but also about accessibility to the lender you are applying with. To apply, you should be able to fill out a simple online application or apply over the phone. A number to call should be made available on an online lender’s website to answer any questions you have. As mentioned, many loan providers also have an online chat option – it doesn’t get much more convenient than that!
Availability – If you are dealing with a professional loan provider, they should have a highly-trained customer care team to help make every step as easy as possible. Don’t be afraid to reach out to the loan provider with any questions you have. Many loan providers have a phone number you can call to guide you through the entire loan process and/or answer any questions. If the loan provider you are looking into is not accessible via web and phone, it may be best to look into an alternate provider who is – to ensure you are comfortable with the loan you are taking out.
All in all, the key to choosing a loan provider is making sure you understand all of the conditions of the loan and how to pay it back.
Before you get a payday loan, installment loan, or a line of credit, you should research where you are getting the loan from. Most importantly, make sure the lender is licensed.
Beyond that, check out the reputation of the lender to ensure you are comfortable borrowing from them. There are plenty of companies that pose as direct payday lenders but are not licensed lenders. Although you may be in a hurry, it’s important to take the time to do your research and weigh your options to ensure you’re making a responsible decision.