Direct Lender vs Indirect Lender: Identify the Better Lender Option for You

Direct Lender vs Indirect Lender Identify the better lender option for you blog thumbnail

What is a direct lender? Should you pick an online payday loan direct lender? 

When looking for online payday loans, you have probably seen the terms “direct lender” and “indirect lender”.  It can be confusing, and you might be asking yourself – What are direct lenders? How do they differ from other payday lenders? This article will discuss direct lending vs indirect lending, pros and cons of each, and how to pick one over the other.

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There are so many lenders out there, and they all have different rates and terms. Is this loan company legitimate? How do I find safe loan providers? How do I find the best loan rate? There can be so many questions when looking for a lender. If you are looking for a lender, it is because you need money fast. You should not have to worry about your security too!  

At Net Pay Advance, we try to help our customers. That is why today we are looking at the difference between direct lenders and indirect lenders. Both lenders have their selling points. Today we will discuss direct lending vs indirect lending. 

How does direct lending work?

With direct lending, you work directly with the lender. There is not a third party involved in the lending process. The application, loan, and payment are all done with the same company.

  • You apply with that company
  • If approved, they send you the funds
  • And then you eventually pay the company the principal and service fees or interest

The whole loan process is with the same company. 

Here’s how direct lending works:

A flowchart showing how direct lending works. Pale blue background bears the title how a direct lender works and features the Net Pay Advance logo and brand name at the bottom. The graphic shows a flowchart that begins with the action of applying for a loan with a lender. This leads to the application being reviewed by the lender and the next step shows that funds are provided by the lender if the application is approved. The final step mentions paying lender back the money owed.

When working with a direct lender, there is only one lender looking at your application and determining if you are approved or not. You only have to submit one application, but that means that you only get one offer if approved. You could shop rates online on your own time. Unfortunately, that means applying to several different companies, which can take time.  

Why is direct lending attractive? One of the major factors is that when you do find a direct lender to loan with, it helps keep the process simple. Since you work with the same company from start to finish, it means that they are available to help throughout the process. There is no confusion on which company you are working with at any time. You know which company to call when you have questions. The person that answers likely knows the loan process, can access your account, and can fix the issue during the call. In this sense, working with a direct lender can be quite convenient!  

When you work with a direct lender, your personal information typically stays with that company. They do not sell out your information to a bunch of other companies. That means you will not be overwhelmed with junk mail. That also helps keep your personal information safe from prying eyes. What are the advantages of direct lenders? What are the disadvantages of direct lending? Get answers below: 

Advantages of direct lender:

  • Only have to fill out one application
  • Simplifies the lending process when you work with one company
  • Much less marketing emails/mail
  • Keeps your information more secure

Disadvantages of direct lending:

  • Working with only one company
  • Only one offer at a time
  • Can be a slower process

How do indirect lenders work?

Indirect lenders usually involve a third party. It is no longer the borrower and lender. It adds at least one middleman to the loan process. Traditionally with indirect lenders, you submit your information to one company, and they send it out to more. Instead of working directly with the lender, you are sending out your personal information to several lenders at once. Along with that, the entire process may be confusing. The company you apply with might not be the same company that lends you money. You may borrow from one company and pay back a different company. It can cause confusion if you have questions during the process.  

Plus, these companies might not be aware of each other’s processes, which can add another layer to the confusion. In addition, it does not leave accountability. If you have an issue or question, there is always a chance that both companies could blame the other one.  

Here’s how indirect lending can work:

A flowchart showing how indirect lending works. Pale blue background bears the title how an indirect lender works, and the Net Pay Advance logo and brand name appear at the bottom-right corner. The graphic shows a flowchart that starts with the action of a customer filling out an application and four scenarios emerging from it where three lenders review the application while one lender doesn’t. These four scenarios lead to consequences like loan being denied by one lender, loan approved by a lender, but the customer doesn’t accept it, loan is approved, and the customer accepts the offer. This last case leads to the customer eventually repaying the loan.

Be aware that this is just one example of what could happen. There’s no knowing how many companies may look at your application, or what they’ll handle the information.  

When you work with an indirect lender, your personal information does not stay in one place. Instead, it is sent out to many other companies and people. Regardless of how legitimate a company is, each time a new person or company sees your personal information, it is a risk. Each new person increases your chance of experiencing fraud or even identity theft. Once you send an application to an indirect lender, you have no way of knowing who sees it.   

Appling through an indirect lender could mean that you will receive several loan offers around the same time. The bad news is that you may get several emails, mailers, and robot calls with offers where you may or may not qualify. The good news is that they will likely have competing prices. However, those low fees may be attached to loans that require a credit check. It’s not unheard of that a company might hook you with a good rate that you do not qualify for after a credit check. Not only is that disappointing, that credit check could also hurt your credit.  

Advantages of an indirect lender:

  • Working with more companies
  • Can see multiple options at once
  • Multiple offers with different rates and terms

Disadvantages of an indirect lender:

  • You may not qualify for every offer
  • Potential tons of junk mail, spam email, and robot callers
  • Higher risk of access to your personal information
  • Confusing to work with several different companies

In conclusion, indirect lenders are great for getting a lot, and we mean a lot, of offers at the same time. It makes the process of finding a lender easier. Direct lenders may only have one or two types of loans. However, you will work with the same company and the same people throughout the entire process. It can make the process safer and convenient.

Direct lending Vs indirect lending

A quick recap of how direct and indirect lending differs from each other is represented in this graphic:

Comparison of direct lending vs indirect lending. Pale blue background bears the title direct lender vs indirect lender. A vertical blue line divides the graphic into two and the characteristics of direct lenders are listed on the left as: simple process when working with one company, higher information security, single application at a time, less marketing emails and communication. The right-hand side lists the characteristics of indirect lenders as: working with several companies can be confusing, higher security risk, more loan options are available, frequent marketing emails and communication. The Net Pay Advance logo and brand name features at the bottom.

Applying for a loan shouldn’t be complicated

There are several ways to find out if a lender is direct or indirect. Most lenders will mention it on their website. Some indirect lenders will say upfront they’re an indirect lender. Others may not say it in exact terms, but there is common terminology. If they say they “will shop around” for the best rates, or something similar, they are likely indirect.  

If the website does not mention it, you can always call the company. Ask the company about their licenses and if they are a direct lender. Since there are pros and cons on both sides, most companies are upfront about it. 

For example, at Net Pay Advance we’re a direct lender in multiple states. Customers can experience the benefit of working with one customer service team, and we don’t sell customer data. Best of all, we make the application process simple. Did you know there are a few simple requirements to apply for a loan with Net Pay Advance? Take a look:

Requirements to apply at Net Pay Advance. Pale blue background displays the Net Pay Advance logo and brand name at the top and just below it, the title says requirements to apply. There are three items on this list, and each is depicted by a logo and explained in text. The text describes the requirements as have an address in a state where we operate, have an active bank account, and must be 18 years of age or older.

Looking for the best direct lender payday loans? Tired of looking for a safe and secure lender? Apply now with Net Pay Advance for fast cash. We keep the process simple, trusted, and secure!

Net Pay Advance is a licensed loan provider, locally owned and operated in Wichita, Kansas. Our No. 1 priority is helping you, the customer, by providing access to the cash you need and helping support financial independence goals with valuable, informational, and entertaining content. Stay up-to-date on our posts by following the Net Pay Advance Facebook, Instagram, and Twitter pages. Our organization is committed to transparency; learn more about our authors and editorial policy. The information provided within this blog is for educational purposes only and should not be construed as financial or legal advice. Please contact us if you have any questions.

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