A payday loan broker is an individual or a business involved in arranging a payday loan between a borrower and a direct lender. For services provided, a payday loan broker may be compensated by the borrower or the payday lender, though it is usually the end lender who compensates the broker.
Sometimes called a cash advance or payday advance loan, a payday loan is a short-term consumer loan made to an individual. There are no specific use requirements for a payday loan. Although the loan is issued the moniker “payday loan” the loan is not made with regards to when or how a borrower is paid.
Payday loans typically require the borrower be actively employed, with evidence of income showing current and year-to-date earnings, as well as having an active checking account. Minimum credit scores are not generally a requirement for a payday loan. Payday loans are usually able to provide short-term loans for consumers with damaged credit.
Repayment periods for a payday loan can vary depending upon the payday lender and the nature of the loan, but most payday loans are due in part or in full at the borrower’s next payday after loan funds are disbursed. A common implementation of a payday loan requires the borrower to write a post-dated check to include the amount borrowed plus accrued interest and any loan fees. The date of the check coincides with the borrower’s payday. Other arrangements for repayment can be made by way of an automatic electronic transfer from a borrower’s bank account on the predetermined due date.
A payday loan broker does not make the loan yet has representative relationships with a variety of payday loan lenders. These payday loan lenders employ brokers to market their loan products for them, collect a payday loan application and forward the application to the payday lender for review. The advantage of a payday loan broker is having the ability to shop for the most competitive rates and terms on the market at any given time.
Further, different payday lenders may have different loan approval guidelines from one another, allowing the broker to identify the payday loan that best meets the borrower’s specific requirements. Borrowers may complete one application with a payday loan broker who then compares various payday lender offerings, submitting the payday loan application to the lender most aligned with the borrower’s requirements.
Payday loans are one of the many financial products currently available to consumers in need of short-term cash. For many consumers, they offer an alternative to credit cards and personal loans. But they are not without their risks. If you are considering a payday loan, whether from a broker or direct lender, make sure you thoroughly investigate your options and loan sources.
Disclaimer: NetCredit is a direct personal loan provider and does not provide financial advice, nor does it vouch for any vendor or service mentioned on our NetCredit personal finance blog or online consumer loan glossary. Always research and perform due diligence on any service provider or vendor before deciding to use them, and we recommend that you speak with a financial advisor regarding all decisions that will affect your finances.