Payday Loans No Brokers
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Representative Example: Representative 1286.98% APR on a loan of £300.00 with 5 monthly repayments of £101.03 Total amount repayable £505.13 Annual interest rate (fixed) 290%
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Author: Internal Marketing Department
The world of Payday Lending has grown exponentially and it this rate of growth that has allowed sceptics to seize the opportunity when it comes to criticizing the unclear dynamics of this industry. There were several companies of the likes of Wonga, Payday UK that more than doubled their workforce in just a span of one year and increased their profits in exponential terms in the same time period. Therefore, there was a need to understand if this growth was leading to a more stable financial environment. However, it has been found that they may have done more harm than good. It is unfair to say that only these lenders are responsible for this as we as customers have not learnt how to be responsible for the money that we borrow.
Talking in the same context, just like conventional banking, this industry has been divided into direct lenders and brokers. Direct lenders would be the lending agencies themselves whereas the brokers are usually individuals hired by these lending institutions to scout for potential customers and increase their customer base.
Differences between Direct Lenders and brokers and why for many payday loans no brokers are a more feasible option:
Although it may be a good idea to hire a broker if you are looking for different lenders to fund your requirements, in the long run, it may not be considered the best option. There are several reasons why this is the case:
· Brokers represent several lending sources as opposed to direct lenders who are a sole lending source. Brokers usually work off of commission and therefore there may be a conflict of interest in finding you the most suitable loan or the most lucrative for them.
· While most brokers do not charge the borrower a fee, The fees which a few brokers charge can be very high in relation to the size of the loan you are seeking. While recent regulation has meant that many fee charging brokers now no longer charge, it is still permissible to charge provided certain criteria are met.
· A broker will often find you one loan with one interest rate. Is that a good rate or not? Without shopping around you may not know. Better deals can often be found if you do the searching and find the best loan for you.
The future of payday loans no brokers:
This is an interesting time to be following the financial world, as it is important to see that there is a reducing dependence on brokers being placed by lenders, when it comes to payday loans. More an more customers are being sourced organically by Pay Per Click or SEO. Some lending institutions which were relying heavily on these institutions are no longer using brokers at all.
However all is not over for brokers. In response to the Competition and Marketing Authorities investigation and subsequent Order a new market is opening for brokers operating Price Comparison Websites (PCW). These will be highly regulated and positions and rankings will depend on the cost of the loan and not the amount the broker will receive in commissions, however as it is likely that every payday lender will have to appear on at least one, there are revenues to be made from this.
One serious drawback that this industry is being charged with is the fact that there are millions of people who are taking out loans each year and because the interest payment is so high, it is leading to people ignoring other payments such as any other loan they could have taken or credit card payments etc. As a result of this, they are filing for bankruptcy and in their debt statement, payday loans account for a large amount of the entire debt. This poses a serious question on the viability of these payday loans as this is turning out to be sure-shot way of becoming bankrupt.
It is interesting to note that there are other old school procedures that are being considered instead of these payday lending procedures. Pawn shop lending is one such practice where people are taking loans in exchange of certain collateral with a minimum value. This too carries interest charge but nowhere close to what payday lenders charge.