What are the differences between online lenders and in-store lenders?
Online lenders differ from in-store lenders in a few key respects.
Online vs. in-store support
When you visit a payday loan store location, you can interact with a lender and ask questions or clarify any element of the loan’s terms and conditions. This could be helpful if you don’t know how to interpret the information. Some lenders can even give you your cash that same day.
An online loan could be an easier way to quickly get the cash you need to catch up on expenses. But you won’t have the in-store one-on-one to knead out any inquiries. Instead, you’ll want to be sure that the lender’s site clearly explains your responsibilities and that there’s a helpline if you don’t understand something.
Online lending brokers vs. direct lenders
A key factor to consider before applying online is whether the company you’re borrowing from is a direct lender or a broker. With a direct lender, you apply to and receive funding from one company directly, often with the ability to speak to a representative if you have questions.
With an online lending broker, you apply to a company that then uses your information to help you shop around for a lender willing to extend a loan that satisfies your requirements. Lending brokers are useful because they can sometimes match you with lenders you may not reach out to otherwise. But make sure to read the fine print: Illegitimate brokers could sell your information to lending companies long after you’ve replied.
When you apply with an online lender, confirm that the lender is licensed to do business in your state. And keep in mind that laws regarding payday lending vary from state to state. For example, in Georgia short-term loans are considered a violation of racketeering laws and prohibited.
Ability to compare loans. With online lending, you can often compare several loan offers. This can make it easier to get the best interest rates and terms for your needs.
High costs. Online short-term loans can be expensive, which makes it all the more important to compare lending terms and interest rates to get more for your money.
No prepayment savings. Although online lenders typically don’t charge prepayment penalties, they also don’t offer prepayment savings. If you repay your loan early, you will still owe the same amount of interest and fees.
Online scams. Many legitimate short-term lenders follow state lending laws. However, others are out there looking to take advantage of online borrowers, posing as short-term loan companies to gain access to banking and credit card information.
How to prevent being scammed online
Loan scammers are known to set up websites that offer short-term loans with quick and easy approval, low interest rates and a guaranteed right to cancel. These sites can make a loan sound like your best option by far.
Even if the loan and website appear legitimate, it’s essential to research the company you’re looking to apply with.
Know the warning signs
Here are a few warning signs that should raise your suspicions about an online lender:
Ungrammatical, unclear writing on website. If the lender can’t clearly describe the loans and conditions of what they’re offering, look elsewhere.
Requires advance fees or taxes. Don’t transfer any funds before you are approved for a loan, even if the lender insists.
Incredibly low interest rates. If a lender offers an interest rate that’s much lower than you find elsewhere, it could be a scam.
Quick decision deadlines. If you’re pressured to make a decision quickly, go with another lender.
Tips to avoid getting scammed
Do your research. A quick online search may bring up reviews and articles about the lender and give you a general idea of their legitimacy.
Ask questions. Ask for the lender’s full business name, address, licensing information and registration to hold the lender accountable. If these questions are avoided or ignored, go with another lender.
Don’t email private information. Never email your Social Security number, credit card or bank account details. Enter this information into a secure website only.
In-store short-term loans also have benefits over storefront lenders.
Physical storefront. When getting an in-store loan, you’ll get a fair idea of the kind of business a lender runs and know where to go for questions or problems.
In-store support. Having an in-store specialist to speak to can make it easier to address any problems.
Application assistance. Loan applications can be confusing and having somebody to work through it with you could be helpful.
Longer process. Unlike an online loan that requires only a few clicks, in-store loans typically take more time. If you’re comparing loans, you’ll also need to visit various lender locations, especially if you don’t live in a commercial hub.
Fewer options. Unlike getting an online loan, in-store loans limit your options to your geographic area.
How to decide which loan option is best for you
When looking for a short-term loan, it’s not enough to look for a low monthly payment plan or the cheapest interest rate. Before signing on the dotted line, here are a few things to review:
APR and fees. The APR represents the true cost of a short-term loan and can be 400% APR or more.
Required creditworthiness. While banks and more traditional lenders can require higher credit scores, online short-term loan lenders typically approve people with less than perfect credit.
Repayment terms. When signing a short-term loan contract, read the repayment terms carefully. The loan is repaid within a specific period of time, often the day after your payday. Know how much you’ll pay for any late payments.
State regulations. Confirm that your lender is licensed to provide services in your state of residence. Of the 38 states and territories that allow short-term lending, 10 require lenders to comply with interest rate caps on consumer loans — Connecticut, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Vermont, West Virginia, Puerto Rico and the Virgin Islands.
Can you get a short-term loan without a bank account?
A short-term loan can be helpful when you need money in an emergency. And both online and in-store loans are easily accessible, assuming you meet the requirements and your paperwork is in order. But be sure to do your research and compare your short-term loan options to ensure the legitimacy of any lender before taking on a loan.
Frequently asked questions
Generally, you must be at least 18 years old, employed or have recurring income and reside in the state you choose for your loan application. Many lenders require that you’re not currently in bankruptcy — check out our guide on bankruptcy loans if you are.
You don’t need to be employed, but you need to have some sort of income. Your retirement pension may be considered a source of income, depending on the lender. Check out our guide on unemployed loans for more information.
Depending on the lender and the contract you signed, you may be able to cancel your loan. Many companies offer a 72-hour window for cancellations.
Aliyyah Camp is a writer and personal finance blogger who helps readers compare personal, student, car and business loans. Aliyyah earned a BA in communication from the University of Pennsylvania and is based in New York, where she enjoys movies and running outdoors.
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