Are you considering payday loan consolidation? You’re far from alone. Millions of Americans are struggling to pay off these high-interest loans, and they’re searching for any way possible to get relief. Payday loans can be a quick and easy way to get the cash you need when you’re short on funds.
A payday loan may seem like a quick and easy solution. But, be careful – if you can’t repay the loan on time, you may be caught in a cycle of debt that’s hard to break free from. Before you know it, you could have multiple payday loans that you just can’t pay back.
The payday loan trap can be a difficult thing to get out of.
You’re not the only one who feels this way.
- In the United States, approximately 12 million people take out payday loans each year.
- On average, you’ll end up paying $550 in fees for the privilege of borrowing just $375.
- According to a recent study, the average interest rate on payday loans is a staggering 671%.
- Lenders make a profit of $6 billion annually from fees.
Is that fair? It doesn’t seem like it is.
A payday loan consolidation is a great way to reduce your overall debt and interest payments.
Payday Loan Consolidation: What Is It?
Payday loan consolidation is a great way to reduce your monthly payments and save money on interest. By consolidating all of your payday loans into one loan with a lower interest rate, you can get out of debt faster and easier.
One loan, with lower fees and easier repayment terms, that’s easier to repay.
There are two main ways to consolidate your loans: payday loan relief programs and debt relief loans.
In this article, we will discuss both ways.
First Way: A Payday Loan Relief Program
A payday loan consolidation program can help you get out of debt by negotiating with your payday lenders on your behalf. These programs, also known as payday relief or debt management programs, can help you get back on track financially.
There are many benefits to using a payday loan consolidation program. For example, you can escape the payday loan debt cycle, have a single monthly payment going forward, and say goodbye to the high interest and fees associated with payday loans. This can be a great way to get your finances back on track.
You will be charged a monthly fee, and the company will pay your lenders.
There are a few different ways that payday loan consolidation companies can help you to get out of debt. One way is to negotiate with your creditors to try and get them to lower the fees they are charging you. At other times, they may choose to pay the lenders in advance instead, essentially providing you with a loan.
You have the option of paying a flat monthly rate over an extended period of time, or you can choose to make your own interest calculations. If you opt for the former, the firm will take care of your lenders.
There are a lot of scams out there when it comes to loan consolidation programs. So be very careful and make sure you understand what they’re doing behind the scenes.
Pros
- You get help from experts.
- Debt amount reduced.
- Experts may negotiate better terms.
- Monthly payments are simplified.
- The reduced amount owed.
Cons
- There are a lot of scams out there, be careful.
- It may only work with certain payday lenders.
Second Way: Debt Consolidation
A debt consolidation loan is a personal loan that allows you to pay off your outstanding debts.
It works in a simple way.
After you are approved for the loan, you take the cash and pay off your payday lenders. Then, you pay back the new loan.
A debt consolidation loan may be difficult to obtain due to a credit check. If you are struggling with a payday loan, your credit may not be in great shape, which could make it tough to qualify for a loan. Before you make a decision about debt consolidation, do your research and understand all the options available to you.
Types Of Loans You Can Evaluate
Cash Advance or Credit Card Balance Transfer
If you are able to obtain a credit card, it is probably a good idea to use it to pay off your payday loan consolidation. The interest rates on credit cards can be as high as 33%, which is still significantly lower than the 400% interest rates that are charged for payday loans.
A Personal Loan
This is a great way to get the money you need for a short-term goal. They are typically unsecured, which means you don’t have to put up any collateral, and will have significantly lower interest rates than a payday loan.
PAL (Payday Alternative Loan):
PAL is not a payday loan, although there are many payday loan alternatives available. PALs are offered by credit unions and have different repayment terms than payday loans.
Pros
- Decreased owed amount.
- You are in complete control.
Cons
- Hard to qualify.
- Need to completely understand loan terms.
Consolidating Your Loans: Benefits
If you’re struggling to pay off multiple payday loans, there are some alternatives for debt consolidation. Here are some benefits of consolidating your payday loan debt:
Reduced Interest Rates
Payday loans can have incredibly high-interest rates. In many cases, the annual percentage rate (APR) for these types of loans is 300-400%. That’s much higher than the typical APR for a credit card, which is usually 20-30%. It’s no wonder so many people fall into the trap of taking out payday loans.
If you consolidate your credit with a service, they will usually lower your interest rate to 6-30%. This can save you hundreds or even thousands of dollars over the life of your loan.
Personal loans offer a variety of repayment terms that can be customized to fit your budget. You can choose a repayment plan that best suits your needs, with terms ranging from 12 to 84 months. This makes personal loans a much more flexible option than payday loans, which typically must be repaid within a few weeks.
Flat Monthly Payments
When you’re late on a payday loan, you might not realize the full extent of the fees and interest you’ll be charged. Even some of the world’s best lawyers have trouble understanding the fine print. With late fees, high-interest rates, and rollover options, it can be difficult for anyone to make sense of it all.
A great credit consolidator can help make this process easier and less stressful. They will work with you to create a more straightforward monthly payment plan, where you only need to pay a flat amount each month. This can help you better manage your finances and get out of debt more quickly.
Terms Of Repayment Are Flexible
If you’re struggling with payday loan debt, a debt management plan may be a more reasonable option. With a personal loan designed for debt relief, you’ll have some flexibility on the monthly payment amount and other components. Compared to payday loans, a debt management plan can provide real relief.
Other Alternatives To Debt Consolidation
There are a few different ways that you can get out of payday loan debt, and consolidation is just one option.
If you’re struggling to pay back payday loans, you’re not alone. In fact, millions of Americans are trapped in the cycle of debt that comes with these high-interest loans. But there is hope. There are a number of debt relief options available to help you get out of the payday loan trap.
Request For Extended Repayment Terms
It’s no secret that both storefront and online cash advance companies don’t expect to recoup all of their money. That’s why interest rates are so high. However, it can’t hurt to give your lender a call and request a repayment plan with reduced interest charges. From the lender’s perspective, it’s better to receive partial payment than none at all.
Contact A Credit Counselor
There are people who have dedicated their lives to helping others get out of debt. These are called credit counseling services. Credit counseling services work with clients to create a plan to pay off their debts.
When it comes to personal finance, credit counseling services have a lot to offer. They can help with credit card debt, mortgages, student loans, unsecured loans, and more. But one of their main focuses is helping people get out of the payday loan cycle. Be sure to do your research first. There are many credit counselors out there who claim to be experts in this area, but not all of them have the same level of experience.
These professionals stay up-to-date on the latest guidelines and laws from the Consumer Financial Protection Bureau (CFPB), an organization dedicated to protecting consumers from predatory lenders.
Consult A Legal Aid Attorney
Payday loans are a quick and easy solution to temporary financial difficulties. However, if you’re unable to pay off the loan on time, these small payday loans can quickly turn into thousands of dollars of debt. A competent attorney can help explain your rights, determine the best way to get out of debt, and negotiate on your behalf.
Bankruptcy: Chapter 7
Chapter 7 bankruptcy is a legal process that allows you to discharge some or all of your debt, including credit card debt and medical bills. The bankruptcy process can be complicated and time-consuming, so it’s important that you work with an experienced attorney who is well-versed in the unique laws of your state.
Bankruptcy can damage your financial reputation for up to 10 years. In addition, bankruptcy isn’t a fix-all—it won’t wipe out all of your debts, and will result in negative marks that can hurt your credit score for years. So think long and hard about whether this is the right solution for you.
Bankruptcy can be reported to the credit bureaus, making it difficult to obtain credit in the future. It should therefore be considered only as a last resort.
FAQs
Are Payday Loan Companies Effective?
Yes, if you do not get scammed. Additionally, it is important to remain committed to your payments over time—this is not a “silver bullet” solution.
To break the debt cycle and permanently reduce your total amount of debt, you should take out a loan or work with a consolidation company. But it is important to follow the plan laid out by your lender.
What Are The Pros And Cons?
Pros
- A single, straightforward annual payment
- There are no hidden advance fees
- Lower interest rates
- An end to unauthorized automatic debits
- No hidden fees such as late fees and others in the fine print.
- No harassing calls from collectors
- Reduction of the risk of a lawsuit
Cons
- It is essential to avoid any future payday loans.
- Advisors must be followed.
- When you pick a well-reputable firm, the downsides of payday loans are minimal. The only people who lose are the payday loan companies themselves—and that’s something we can all celebrate.
Where Do I Make My Payments?
If you work with a payday debt consolidation company, you’ll make payments to the company at the end of each month.
You are responsible for using your personal loan to pay down the lender; after that, you will make payments until the loan is paid off.
Do I Need Good Credit In Order To Consolidate My PDLs?
For payday relief programs, debt management plans, and other financial aid, applicants may or may not have to have their credit report checked before they are accepted into these programs.
However, in order to qualify for debt consolidation, you can expect a credit check to be required.
Will This Decrease The Amount That I Owe?
Yes, if a consolidation program is done correctly, it can reduce the total amount owed and the effective interest rate you will be paid. Ask the firm upfront to show you the before and after amounts and interest rates owed.
Does The Government Help With PDLs?
The government does not provide much help for individuals struggling with payday loan debt. While many states have outlawed payday loans, tribes often use their tribal immunity to continue making these loans in states where they are illegal.
Are There Any Non-Profit Organizations That Offer Payday Loan Consolidation?
We are not aware of any non-profit payday loan consolidation companies. Be very careful if you see a payday relief organization that is masquerading as a non-profit. You can find information about 501(c)(3) organizations on the IRS website.
Can I Consolidate All Of My Payday Loans Into One Loan?
This depends on a few variables.
One potential drawback of working with a payday loan relief company is that the company may not work with certain lenders. This is particularly true for payday loan consolidation companies that rely on negotiating with lenders.
May you’re considering consolidating as many of your high-interest loans as a consolidation loan will allow. You can pay off both debts if you are approved for a $1,000 loan and have two payday loans outstanding with a total of $500 due each month. However, if you have three payday loans totaling $500 each that are charging you $80 in interest each month, you can only consolidate two of them because debt consolidation does not cover the amount owed on the third loan. If you find yourself in this situation, always pay off the highest interest loans first.
Are You Able To Settle Your Payday Loans?
Some lenders will reduce your debt if you ask them. Other lenders have firm no-settlement policies.
Regardless of your lender, it is best to ask. Your best chance of settling your debt is to make a strong case that you will not be able to pay. The lender needs to think “it’s better to get some money than no money”.
Can You Go To Jail For Failing To Pay A Cash Advance?
No, you cannot go to jail for not paying a cash advance, payday, or any other type of loan in the United States. If you receive a court summons and fail to appear, however, you could be charged with a misdemeanor of failing to appear in court. This is not the same as going to jail for not repaying a loan.
Debt Free Living
The benefits of avoiding payday loans are numerous. Late fees, interest charges, and other penalties that accumulate can end up being several times the amount of the initial loan, leading to a pile of debt that grows harder and harder to repay. Not to mention the hit to your credit score and the constant threats of being jailed.
The financial burden of the disease is significant, but the stress of coping with it can contribute to your ill health and that of your family members.
Payday loan consolidation programs can help you get out of the payday loan trap and back to living the life, you were meant to live.
