Choosing the right payday loan company may not be as challenging as someone might think. State regulators have imposed tough regulations on payday lenders. These regulations have lead to many of the smaller lenders to close their doors. Furthermore, in August of 2013 one of the largest banks that provided automated clearing house processing (ACH) for payday lenders shut the door on processing online payday loans. This left the market scrambling. ACH is how money is transferred to bank accounts as well as how money is debited. It was said that close to 200 online payday lenders closed their doors overnight. Since that time other ACH companies have tightened up on all money transfers from online lenders by imposing tougher guidelines. Conversely, these actions have paved the way for some great companies to rise to the top.
State Licensed Lenders Have Better Value and Service
Before we dive into choosing the right payday loan company, let’s first address the two types of lenders. First, there are state-licensed payday lenders. State licensed lenders follow the laws of each state. Which includes what a company can charge their customers and what needs to be disclosed in their contact to the borrower. This includes payday loans and installment loans. Clearly displayed on their website is a copy of the current license for your state. Since the state regulates the interest you’re sure to get the best rates online.
Pros and Cons
- Lower rates
- Slightly higher approval requirements
- First class service
- Phone number clearly stated on website
- Next day cash
- State regulated
Tribal Lenders May Have Easier Qualifications But Higher Rates
The second type of lender is the “sovereign immunity model” this is where loans are provided through an Indian tribe. In contrast to the state lending model lenders are regulated by the tribe and rates are generally much higher. In a recent phone call with the president of a payday loan software provider, he stated that “tribal leaders have buckled down on lenders using their sovereign immunity”. They wanted lenders under the sovereign model to align themselves closer to the state model. Rates were not discussed in the conversation.
Pros and Cons
- Easier to get approved
- No traditional credit checks
- Higher rates
- Regulated by Indian Tribe
- Next day cash
Without question, a state licensed lender is going to provide you the best value at the same time better service. Most state model lenders are also part of the (OLA) Online Lenders Alliance. The OLA is the center for lending technology, and innovation representing the growing online lending industry. Additionally, OLA members abide by the best practices and code of conduct to ensure their customers are fully informed. This information is clearly posted on their website. When choosing the right payday loan company here are some of the best lenders.
- Speedy Cash
- Money Tree
- Advance Financial
These lenders may have slightly higher approval requirements but they do not make traditional credit checks with the big three Experian, Equifax, and Transunion and provide first class service to the borrower.
Choosing The Right Payday Loan Company Borrow Responsibly
When choosing the right payday loan company, remember to borrow responsibly. Whether you choose a state model payday lender or a sovereign lender interest rate are high and borrowers should use caution when borrowing. Never borrow more than you need or can payback. Borrowing for pleasure is not advisable. Use your payday advance for cash emergencies.