There is a process called payday loan debt consolidation that many people have used to finally get out from under the weight of thousands of dollars in payday loans. Although payday loans can be extremely helpful in a situation where you need money fast, if they are not paid back in a timely manner the interest and penalties can grow quickly. The good news is that there is an organized way to get rid of the debt: consolidation.
Why Should You Consider Debt Consolidation?
- To break the payday debt cycle
Sometimes, you get stuck in a payday debt cycle since you are unable to pay off your old debt without taking a new one which is even much higher. Many people face this difficulty because it is easier to get payday loans especially when you are approved for the first one. Due to that borrowers tend to take another loan right after they have paid for the previous one. Usually, they get to qualify for higher loan amounts. This can continue until the debt becomes even higher than they can actually pay at once. If it turns out that you have other similar payday loans, you will definitely need to consolidate your loans to help you clear them faster.
- To stop creditors and debt collectors from reaching out to you
If lenders realize that you are not able to pay off your debts, they will begin to contact you for their money. In some cases, they will sell your account to debt collectors and they will begin to contact you for the money. This can be really uncomfortable and may even seem as though they are haunting you. No one wants to be in that kind of position. Hence, when you realize that you have gotten to the point where you can barely make monthly payments, you should consider payday debt consolidation. You need to act fast before the lenders begin to contact you.
- To improve your credit score
If you need to get a new credit facility, you will need to check if your credit score is good enough to get you a loan at a low rate. If your credit score is low, you are likely to get the loan at a high interest rate. This can put more pressure on your loan payments. You will need to make a higher monthly payment. If you do not need the loan urgently and you do not want to pay high rates on your loan, you should repair your credit first. Debt consolidation is one of the most popular ways of repairing your credit. You do not need to wait until you need a loan before you repair your credit. When you realize that you have a low credit score, you should consider repairing your credit. It is better to repair it when you have time than to do it in a haste.
- To reduce your debt
Debt consolidation, when successful allows you to make a lower payment on the due date. The payments will be adjusted and it will be manageable enough for you to pay.
How is Payday Loan Consolidation Done?
With payday loan consolidation, you will need to get a personal loan to pay off all your previous loans. This will put all your debts together and then you can make a single payment when the debt consolidation is successful.
The first thing to do when you want to begin debt consolidation is to put all your payday loans together. You should check the rates on the loans. Once you know the total amount, you can check for lenders.
Check loan package rates
You will need to check the rates offered by the various lenders. This is important because you need to consolidate the debt with a loan that has much lower rates. The main reason why you are consolidating your loans is to reduce your monthly payments and save on interest rates. Hence, if you get a loan with a much higher rate, you will incur more debt instead of reducing your debt. You should also look at the fees involved in debt consolidation. If you realize that the fees are high and you will not save anything when you take out the fees, there is no need to consolidate your credit.
Get the personal loan to repay your debts
Once you settle on a lender who can offer you lower rates, you can get the loan to clear your debts. You will then be required to make single payments to the new lender.
It is important that you do not miss payments with your new lender. If you want to consolidate successfully, make a budget and stick to it. Your budget should only include your basic things. This will help you to save enough cash to pay your loan. You can also get a side job to increase your income to make it easier for you to make payments.
Alternative to Loan Consolidation: Debt Settlement
Using a debt settlement company will help you to reduce the total balance that you owe, and then combine all of your payments into a single one each month. This will take away the stress of several lenders calling you, sending you letters, or email you every day. The settlement company will take responsibility of disbursing the correct amount of funds to your payday loan lenders until your debt is gone. Here’s a little more information about how the process works:
At the beginning of the process your settlement company will open up a savings account for you to deposit a certain amount in each month. This amount will be based on your current income and expenses and will not be more than you can feasibly afford. Once this savings account has reached a certain amount the negotiators can begin communications with all of your lenders to request a reduction in balances and monthly payments. If your negotiators have worked with your lenders previously there is a good chance they will be able to reduce your debt quite a bit.
Once the negotiator seals the deal and your lender has agreed to a reduced amount you will be notified of what your new monthly payment will be and for how long. Finally, you will be able to see a light at the end of the tunnel when it comes to your payday loans. When you make your final payment your payday loan lenders will mark your account as “settled” so that anyone who checks your credit report will not see that as an outstanding debt.
If you feel like you see a letter every day from a different payday loan lender and feel like you have more interest and penalties added to your balance every hour, then you may be able to benefit from a payday loan debt consolidation. The program will organize your payments, stop the interest and penalties, and give you a solid deadline when you know your debt will be gone for good. If this payday loan debt consolidation is something you are interested in, please fill out our no obligation online form or call our toll free number to speak with a knowledgeable representative today.
When you manage to clear your debt, make sure you do not accumulate more debt any longer. Do not begin to spend lavishly if you cannot afford it. You should continue to make a budget and stick to it. Do not go in for a loan you cannot afford to pay. You should also work on improving your credit if you plan on getting another loan. When you have a good credit score, you will get loans at lower rates and you will be able to pay them easily.