A direct loan is any loan arrangement made directly between the borrower and the lender. Direct lenders can be banks, nontraditional lending institutions, or the government.
What Is a Direct Loan?
A direct loan is a type of loan made between a lender and a borrower, without any third party involvement. Direct lenders include the government, banks, and other financial organizations.
When smaller banks and lenders don’t have enough funds to approve a certain loan application, they usually have to go through third-parties with more resources. With more parties involved, the cost of borrowing goes up, and you get a loan with more interest.
The term “direct loan” is mostly used for student loans. However, it can also reference any other lending without a middle man, such as mortgages, direct payday, and installment loans.
Direct loans usually carry a lower interest rate than other loans. Besides being more affordable, direct loans are also generally faster, as they involve fewer parties and less paperwork.
Direct loans can come with other perks such as fixed interest rates or income-driven repayment plans where the payments are based on your salary so that your budget doesn’t suffer too much.
Federal student loans offer the most benefits, as the government wants to encourage people to pursue higher education.
What Are Direct Payday Loans?
If you are thinking about taking out a payday loan, you can go to a direct lender. Direct lenders offer loans without third-party brokers. Third-party brokers’ prime responsibility is to bring sellers and buyers together. Therefore, a broker is the facilitator between a buyer and a seller. A broker collects a borrower’s information and then tries to find the best offer for them, and in return, the broker takes a percentage of the loaned amount.
Payday loans are frequently used as a quick financial solution. When planned properly, payday loans provide a quick cash injection that helps out. If not planned properly, the consumer can end up in a cycle of debt, alternating between borrowing and repaying.
Because of the potential issues with late payments, it is important to have a plan for repaying your loan, and to examine the interest rates of additional loan options.
What Are Direct Installment Loans?
You can get an installment loan from a direct lender. With this type of loan, you borrow a set amount of money that you then pay back with interest over a specified period.
Payments are usually made monthly, and since installment loans have longer terms, these payments generally don’t stretch a budget too much. To get an even lower interest rate, borrowers can go directly to a lender rather than using a third-party broker.
What Are Direct Mortgage Loans?
When deciding to buy a house you have two options, you can either go to a direct lender or hire a mortgage broker who acts as an intermediary by helping you find the best lender and providing all the information about mortgage applications.
Brokers are great for people who don’t have time to research different lenders and options, as a broker can do all the work, and then provide the necessary information. Brokers usually charge a certain percentage of the mortgage amount for their services.
Direct lenders are banks or financial institutions that decide whether you qualify for a loan and then issue the check if you do. You can always compare different lenders and choose the one that offers the best conditions. Going to a direct lender is usually a faster and cheaper option, as there is no middle man involved.
What Are Direct Federal Student Loans?
The federal government offers student loans to help pay for education. These loans are provided to both students and their parents, and they usually come with lower interest rates to help more people pursue higher education.
The US Department of Education manages the William D. Ford Federal Direct Program, which is the only government-backed program in the US at the moment. Private lenders also offer student loans, often at better interest rates, but don’t have benefits like consolidation and forgiveness plans.
The amount and type of loan are determined by a student’s school. Some of the common types of direct student loans include:
1) Direct Subsidized Loans
Direct subsidized loans are offered to students who exhibit financial need. The Department of Education offers to pay interest rates during the educational program, and six months after completion.
That way, students don’t accumulate debt during school, and they can start paying it back after they have finished and started working.
2) Direct Unsubsidized Loans
Direct unsubsidized loans are offered to students regardless of financial need. The student is responsible for paying the interest at all times since the Department of Education doesn’t cover this type of loan.
While the terms are not as good as with subsidized loans, unsubsidized ones still come with lower interest rates and are one of the most affordable loans.
3) Direct Consolidation Loans
Direct consolidation loans let you combine multiple educational loans into one. This way, you only have one monthly payment, which makes repayment simpler.
You can also choose a long term so that you have to pay a lower amount each month, but keep in mind that this means more interest in the long run.
4) Direct PLUS loans
Direct PLUS loans are offered to graduate and professional students as well as parents of dependent undergraduate students to help pay for education expenses.
While these loans are not dependent on financial need, a credit check is required. People with poor credit histories have lower chances of being approved.
How Can I Apply for a Direct Loan?
At CreditNinja, we offer direct installment loans. Start your application today, find out if you are eligible, and receive funds as soon as the next business day after your application is approved.
The cash you need at ninja speed.