Choosing an In-Store or Online Lending Company
April 16, 2021 by MoneyKey
Choosing a lending company can be a difficult task, especially when you’ve encountered an emergency expense and aren’t sure where to turn. Even if you’re in a hurry for extra funds, it’s important to take the time to weigh your options and make sure 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’ll pay it back and how much it’s going to cost you over the term of the loan. When choosing an in-person or online lending company, you should always ensure you’re borrowing from a qualified lender or service provider to protect your rights as a borrower.
Different loan providers offer different products, so be sure to do your research and understand any applicable laws, such as state laws that apply to them, regardless of whether the lender has physical locations or is an online lending company.
The first decision you have to make is whether you want an online loan provider or one with a physical presence.
Online Lending Company
If there are no in-store lenders nearby, or you simply prefer the nature of borrowing money online, then loans such as payday loans online or installment loans may be the preferred option for you, depending on your situation.
Utilizing an online lending company may allow you to avoid some of the features that come along with storefront loan operators. This can include travel time, waiting in lines, and managing your time around a storefront’s business hours.
Online loan providers generally find 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 financial institutions that provide online loans offer virtual assistance via online chat and/or a phone number to call for additional information, making the experience quick and easy, but also safe.
This doesn’t mean that you should go with the first online loan company you stumble upon. Do your research, 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 lending company you are applying with.
Storefront Lending Company
Some people are still more comfortable going into a physical store and speaking with someone directly. This approach may be helpful to those borrowing for the first time and/or those who prefer to interact directly with a representative of the lender at a storefront location before agreeing to the terms of a loan.
A storefront lending company 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 financial institutions’ sites have data security certifications and if you apply for a loan with a licensed online lender, the lender must work diligently to adhere to lending laws, privacy laws and any other applicable federal and state legislation. Make sure you take the time to confirm that you are speaking with a reputable company.
Loan by Phone
You can also apply for loans over the phone if you’d like to speak with someone directly without having to visit a store, depending on the lender. This is a great option for those who would prefer to connect with a person throughout the lending process and ask some questions.
The great thing about applying over the phone is that you may 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 the products they offer, whether that be payday loans, installment loans and personal lines of credit, to ensure you’re looking at the right financial product for your situation.
Direct Lender Loans vs. Loan-Matching Services
While you’re researching the right lender for you and ensuring they’re a good fit, it’s also important to make sure you understand whether the loan company is a direct lender or a loan-matching service.
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 acts as 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.
Understanding State Lending Laws
Another key element to remember when researching loan providers is that different providers are licensed to do business in different states. It’s important to look for the state in which you reside in; usually you should be able to find this fairly easily on the financial institution’s website. For retail locations, this isn’t as much of a concern since storefront locations will be licensed operations, but it’s important to look for your state on the website of an online lending company 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 details on their state license itself. When you apply for a loan with a reputable lender, you’ll be asked to choose the state you reside in so you are directed to the right product. If you’re not asked these questions by your lender, it may be best to look elsewhere to ensure the right precautions are being taken before you agree to a loan.
Once you’ve found a lender that adheres to the proper regulations of your state, it’s time to make sure you understand the fine print.
When you apply for a loan or a line of credit with a reputable lending company, you’ll need to review and sign a loan agreement which details the terms of the product you’ve applied for, as well as all fees and/or 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’re looking at meets the criteria listed below.
Make sure that the lending company 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 financial institution that adheres to applicable laws. Again, check back to ensure they are licensed – you will also receive a very detailed loan agreement entailing the terms of the loan and other requirements. When you borrow from a loan company, you should 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.
You have to be able trust your lending company 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.
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 a financial institution’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!
If you’re 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 lending company 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.
Pick a Lending Company That Suits Your Needs
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 apply for any loans such as a payday loan, installment loan, or a line of credit, you should research where you’re getting the loan from. Most importantly, make sure the lender is licensed.
Beyond that, check out the reputation of the lender to ensure you’re 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.