Direct lenders fund the loan themselves.
Unlike marketplaces, a direct lender originates and services your loan. They must be licensed in your state, disclose all fees before you sign, and follow your state's lending laws. That does not make them cheap — typical APRs still range from 300% to 700%+.
Direct lender vs marketplace
Lends you money directly
The company originates, funds, and services the loan. They are the entity you owe money to and the entity that debits your bank account on the due date.
Connects you with a lender
The company does not lend money. It collects your application and passes it to one or more lenders. You may not know which lender you will get until after approval.
Must be state-licensed
Direct lenders must hold a lending license in each state where they operate. You can verify this with your state's banking department or financial regulator.
300%–700%+ APR typical
Even state-licensed direct lenders charge very high fees. A $15-per-$100 fee for a 14-day loan equals ~391% APR. Some states allow higher fees.
What to verify about any direct lender
State lending license
Check your state's financial regulator website to confirm the lender is licensed to operate in your state. Unlicensed lenders have no obligation to follow state fee caps.
Total cost of the loan
Ask for the total dollar amount you will repay (principal + all fees). Federal law requires lenders to disclose the finance charge and APR before you sign.
Repayment method
Most payday lenders require ACH debit authorization. Understand exactly when and how much will be withdrawn from your bank account on the due date.
Rollover policy
Ask what happens if you cannot repay on the due date. Can you roll over? What is the additional fee? Some states prohibit rollovers; others allow multiple.
If you choose...
If you verify you are using a direct lender:
- Your personal information goes to one company, not dozens
- You can verify their state license and confirm they follow your state's fee caps
- You deal directly with the same company for questions, disputes, or payment plans
- The terms you see on the website are the terms you will get
If you use a lead generator without realizing it:
- Your SSN, bank info, and personal data may be sold to 5-50+ companies
- You will receive calls, texts, and emails from lenders you never contacted
- The final lender's terms may differ from what was shown on the original site
- You have no recourse with the lead generator if something goes wrong with the loan
Here's what you can do today
- Check the bottom of the website for the phrase 'we are not a lender' (this means lead generator).
- Look for a state license number and verify it at your state's financial regulator website.
- Search the company name + 'complaints' to check for patterns of issues.
- If a lender contacts you that you did not apply to directly, your data was sold by a lead gen.
- Use Balance On Hand to check whether you need to borrow at all before applying anywhere.
Know exactly who you are giving your information to before you apply.
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