A direct deposit loan is a loan in which the financial institution or loan officer deposits the funds directly into the borrower’s bank account, and then automatically withdraws the payments or full amount of the loan on a scheduled date. Direct deposit loans are convenient for both loan officers and borrowers because they minimize paperwork and eliminate late fees.
In fact, many financial institutions and payday loan centers provide small discounts on interests if you agree to a direct deposit loan. If you repay the loan in some other way, the chances that you might default are greater, so loan officers are willing to reduce interest for a more guaranteed form of payment.
Of course, you can only apply for a direct deposit loan if you have a checking or savings account into which the funds can be deposited. In order for the transaction to complete, the bank or loan center must have the account number and routing number, which can be found at the bottom of your checks, as well as written authorization from you.
Furthermore, a direct deposit loan is generally faster than other types of loans, and can be deposited into your bank account immediately. It is similar to a wire transfer except that no cash ever exchanges hands, and it is documented not only with the loan officer, but also with your bank. If there is ever a question as to the amount of the deposit, it can be verified immediately.
If you think that your poor credit history or credit score might disqualify you for a loan, using direct deposit might increase your chances. Once you prove that you are gainfully employed with regular paychecks, the loan officer can feel more confident in giving you a loan since it will be automatically withdrawn when due. This isn’t a foolproof way to secure a loan, but it does help.
Many consumers choose to apply for direct deposit loans over the Internet, particularly since the funds arrive faster that way. If this is the case, using direct deposit will make the process much easier since you won’t need to fax over any information, and you won’t have to worry about writing a post-dated check for the amount of the loan.
If you’re going to apply for a direct deposit loan, make sure you choose a financial institution or loan center that has a good reputation with customers. The larger companies are always safer bets than smaller, more obscure institutions, particularly since you’ll be handing over your checking account number when you apply.
Before you apply for a direct deposit loan, research at least ten providers. Find out how much they charge in interest and fees (including hidden fees in the contract) as well as the requirements for approval. Since most direct deposit loans are sought in a hurry for one-time expenses, time is usually of the essence.
In all honesty, it is usually easier to prove your identity and employment status if you apply for a direct deposit loan at the actual brick-and-mortar loan center, but it can be done online. Most Web sites for short-term loans have Store Locator options so that you can find the one nearest you. Make sure to take your Driver License, your last two paycheck stubs, your checkbook and your last bank statement, just to be sure. You might also have to verify housing by providing a recent utility bill.
Direct deposit loans often have high fees and high interest rates, but they can save you plenty of time and energy when you need cash immediately.
