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What is a Direct Lender Payday Loan?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 06 February 2020
  • Copyright Protected:
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    Conjecture Corporation
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A direct lender payday loan is a type of short-term loan that is obtained from a lender who manages the entire balance of the loan from his or resources. Loans of this type are normally restricted in terms of the amounts by the wages and salary of the borrower, but usually do not involve running credit checks. When used responsibly, a direct lender payday loan is helpful in managing unanticipated expenses without any delay.

With a direct lender payday loan, the borrower is often required to provide basic information such as proof of identity, proof of residence, and proof of income. For people who are employed by others, this usually means providing a copy of the most recent paycheck stub. Applicants who are self-employed may be required to provide accounting documents that verify income, such as profit and loss statements or even annual tax returns. Lenders will also require the most recent copy of the applicant’s checking account statement as part of the qualification process.

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The advantages of a direct lender payday loan include the ability to obtain quick cash during an emergency. Once the account is established and the first loan is paid in full according to the terms and provisions, the borrower can normally return to the lender and obtain a second loan without having to repeat all components of the initial application process. Some services even offer the option to obtain the payday loan online and have the money transferred directly into a bank account, rather than requiring the borrower to receive cash in person. Many people find that this type of loan service is ideal for managing issues such as car repairs or other expenses without the need to wait for the next paycheck to arrive.

There are also some disadvantages of a direct lender payday loan that must be considered. One has to do with the rate of interest applied to the loan. Typically, that rate is considerably higher than the rates extended for more conventional loans. While this may be a minor issue if the loan is paid off in a couple of weeks, the interest can grow significantly if the loan is rolled over for successive two week periods. In addition, many direct lenders impose stiff fines and penalties if a loan is not paid off within the time frame allotted, up to and including criminal prosecution in some jurisdictions. For these reasons, it is important to make sure the money to settle a direct lender payday loan in full and on time will be available before attempting to obtain the loan.

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