Payday Loan Consolidation
Financial companies offer different types of debt consolidation to consumers. As a customer, you should take time to understand these debt consolidation plans to see if it will suit your needs.
Loans for debt consolidation are also referred to as debt settlement, debt management, debt negotiation, and debt relief. Although all of these have one goal which to consolidate debt, each of them has unique features and benefits in resolving multiple debts.
It is up to you to decide which company will meet your goal in reducing or eliminating debt. If you need help in deciding which will work best for your circumstances, reach out to the debt consolidation company’s in-house debt counselors for assistance.
For debt relief companies who do not have in-house counselors, they can refer their clients to affiliate or partner companies that offer credit counseling and legal assistance.
How Will A Payday Loan Consolidation Program Benefit Me?
- Reduce your payments every month
- Get rid of high-interest rates
- Eliminate late payment fees and rollover charges
- Stop bothersome collection agencies
- Prevent lenders from pursuing legal action
Getting Out of Multiple Payday Loans
- Create a record of all expenses so that you can reduce unnecessary expenses
- If possible, rent or buy a less expensive home and reduce car/transportation expenses
- Try to find an extra job or part-time hustle to boost your income
- Decline invitations to go on expensive trips or holidays
- Rent out an extra room to increase incoming cash flow
- Cut down on household expenses and use the money to pay down existing debts
Payday Loan Consolidation – How it Works
A loan consolidation firm helps you settle your multiple debts by working with loan providers to reduce ongoing loan interest rates. The loan consolidation company pays your existing debts to eliminate or reduce interest rates and fees.
Companies specializing in debt management also offers to counsel on proper handling of debt and collection agencies. You will receive a payment plan to follow that will help you achieve a debt-free life.
Understanding the Concept of Debt Consolidation
The goal of debt consolidation is to merge several loans with high-interest loans. Many consumers have more than one loan – payday loans, installment loans like mortgages, car loans, and student loans. Moving all of these loans into one account greatly reduces the interest. The primary benefit of debt consolidation is to pay lower interest rates so that payments are easily managed. Effective debt consolidation can reduce and eliminate your multiple outstanding debts.
How Much Will I Be Required to Pay Every Month?
The lender will expect you to pay a certain amount based on these factors: the number of loans that you have, the size of the debt or total debt amount, and the number of lenders that has to be paid.
Pros and Cons of Payday Loan Consolidation
- No need to pay upfront
- The interests of your loans are significantly reduced
- The fees that you are paying for before will be waived
- Your account will no longer be accessed by lenders
- You will follow an organized monthly payment plan
- Stop annoying collection firms from calling you
- You should avoid taking out more loans
- Minimize your spending to reduce outstanding debt
- Your assets can be put at risk
- A debt settlement program can take several months to complete
Should I Go For A Consolidation Program or A Consolidation Loan?
If you prefer to have fixed monthly payments, you should opt for a payday loan consolidation program. Through a loan consolidation program, you will clear your existing payday loans without risking any collateral.
A consolidation loan, on the other hand, requires you to put up collateral to obtain it. This means your loan is secured against your assets.
Can I Get Into Trouble By Not Paying My Payday Loans?
You will not go to jail because you did not pay off your payday loans. The lender, however, will take the necessary steps to recoup the money from you by sending your debt to collection agencies or filing a case against you.
Consolidating Your Payday Loans
The payday loan consolidation industry is very competitive so there will be no difficulty finding a service provider. Before choosing a company to help you with debt consolidation, make sure to read what they say on their website. This is crucial since you should know whether the service that they offer is what you need.
If you are simply making a request, you are not yet signing an agreement. It is your chance to study what they have to offer and if they explain clearly how their debt consolidation program works.
Getting Out of a Payday Loan Fiasco
Before taking out a debt consolidation program, you should assess whether you can or cannot handle debt repayments on your own. In general, you should start making changes to your spending and lifestyle. Consider taking on a second job or part-time work to increase your cash. There are many possibilities of earning more than what you are getting right now. You should also consider asking for your family’s financial help before taking out another loan to consolidate multiple debts.
Choose a Debt Consolidation Firm with Great Customer Service
When it comes to choosing a debt relief company, it is of utmost importance to look at how they handle their customers. Conveying your concerns about your finances is challenging thus a professional credit counselor can make a customer more comfortable discussing their problems.
How to Find a Suitable Payday Loan Consolidation Company
When you are wallowing in debt, it is comforting to have someone provide valuable and clear information. It is recommended to look for a company that is known not just for their success, but also for their integrity. A debt relief company employs properly trained and licensed credit counselors. A debt relief company must show concern and empathy to their clients.
Payday Loan Relief Companies Handle More Than Just Payday Loans
Despite their name, payday loan consolidation companies do not only help in settling multiple payday loan debts. They also help with other types of loans including credit card outstanding balances, utility bills, hospital and medical bills, and other types of unsecured personal loans. Most debt relief companies will accommodate debts amounting to $7,500 an up.
Typically, debt consolidation companies do not handle mortgage problems, car loans, and other secured personal loans.
The best debt management company does not stop at helping customers settle their current debts, they should also help customers understand the cause of the problem to avoid financial problems in the future.
Why Transparency is Crucial When Dealing With a Debt Relief Company
Unfortunately, many consumers have bad experiences when dealing with a debt relief company because of misleading information and false promises.
Debt consolidation companies should be transparent and straightforward when providing customers information. This applies to the debt relief company’s terms and conditions and practices.
Verifying a Debt Consolidation Company’s Transparency
The first thing you should check is the debt relief company’s website. The website should contain important and relevant information about the company including their physical address, contact information, the people behind the company, and how long they have been active in the debt consolidation industry.
Indications That You Are Dealing With an Honest Company
List of all the services they provide such as debt settlement, debt management programs, credit counseling, and more
- The fees associated with their programs and services like interest rates, origination fees, late payment fees, monthly fees
- How long it will take to pay off the loan and if there is a prepayment penalty for setting debt earlier than agreed-upon
- The minimum credit score required
- The required amount of debt to qualify
- If a personal credit counselor will be assigned to you and how you can reach the counselor
- Complete and relevant information on their website
How to Know If a Loan Consolidation Firm is Trustworthy
Change, they say, is the only permanent thing in this world. But when it comes to businesses, the trustworthiness and longevity of a company are very important. If you are finding it difficult to manage your credit card debt or need counseling because of your recurring debt, a loan consolidation company with a proven track record is the best option.
How To Know If A Loan Consolidation Company is Reputable
A company that has withstood the test of time can be considered established and reputable. No company can stay in business for a decade or more if their performance does not satisfy their customers.
How Can the BBB Help In Debt Consolidation?
The Better Business Bureau (BBB) is an agency that collects the complaints received by companies and organizations. When looking for a BBB-accredited debt relief company, you should verify whether the company has pending or unresolved customer complaints.
Federal Trade Commission Regulations on Loan Consolidation
The FTC or Federal Trade Commission implements a strict rule to govern and regulate for-profit organizations in the lending industry and financial sector. The TSR or Telemarketing Sales Rule was created to protect people from businesses offering loan consolidation services.
The TSR has the following provisions:
- Customers will not be required to pay fees upfront
- Debt consolidation companies cannot collect any fee or commission until the customer’s debt has been resolved and settled
- Both parties (loan provider and borrower) must have a written agreement stating the terms and conditions of the settlement
- The customer should make one payment to the loan provider, at the very least, before the debt consolidation firm can collect any fee
- Should the customer have several debts, the debt relief company can ask for a for every loan settled, but none before a loan has been completely paid for
- The customer must be informed about how long it will take to settle the outstanding balances, including how much the total settlement will cost
- The customer must be fully informed not only about the advantages of the program, but also the disadvantages
- Debt consolidation companies should not make any false claims, especially when it comes to the cost of the loan consolidation and the success rate of their programs
Payday Loan Consolidation: Avoiding Scams
Scams are always present in the lending industry, including the debt consolidation sector. To avoid being scammed, here are the signs to look out for:
- Company claiming to be not-for-profit even if they are
- Company guaranteeing to settle your outstanding debt for a very low price
- Company asking for fees before any written agreement is signed
- Company asking you to make a decision quickly through hard selling
- Company promising a “band-aid solution” for programs that would usually take three or more years to complete
Payday Loan Consolidations to Handle Problems with Payday Lenders
Many people turn to payday loans to take care of their urgent financial needs, not realizing that it could dig them deeper into debt.
Studies show that about 80% of payday loans are not settled within the next two weeks. This means that the payday loan will be rolled over with an APR of 300% or higher. In the end, the debt continues to grow. According to the same study, borrowers rollover their loan by up to 10x.
Is There A Better Solution To Get Rid of Debt?
Payday loan consolidation is a better option to get rid of crippling payday loan debts. Debt relief companies will transfer the multiple payday loan balance into one debt. Although companies offering debt relief also charge interest rates for the loan consolidation, the rates are often more reasonable than the typical APR that most short term loans are associated with.
Programs to Consolidate Debt
Debt consolidation companies help their customers by getting them to follow a debt management program. The customer is given the ability to pay off their outstanding payday loan debts over a longer period.
Helping through Education and Counseling
Reaching out to a debt consolidation company has benefits for borrowers struggling to pay off their payday loans. The first thing a borrower learns is to accept the mistake – the experience should teach him to avoid such problems in the future.
Non-profit debt consolidation organizations help educate consumers to take care of their financial future. They are required to include counseling to their services to retain their status as a tax-exempt organization.
Credit counseling is normally offered without any cost to the customer. The counselor will review the finances of the customer, with a focus on the source of the problem and teaching the customer to manage a budget properly.
The information gathered from the customer is reviewed after which certain recommendations are given like a plan to manage the debt, debt settlement, or filing for bankruptcy if necessary.
How to Choose a Company to Help with Debt
Choosing a company to help you with your financial situation requires a good understanding of your current situation. To obtain the best help possible, you should be aware of the resources available and the debt management programs that can be obtained.
Should I Work With a Company That Specializes in Payday Debt Settlement?
Even if you have enough money, you may need more time to pay off your loan. In this case, a payday debt management plan is a better option than simply settling the debt. In the case that you are trying to eradicate debt, payday debt settlement firm is the most suitable option.
The debtor must understand the various definitions and functions of debt consolidation companies before choosing a provider of debt relief. The key is to find a company that provides a specific type of program required to improve your financial situation. The right company not only makes the customer comfortable in discussing financial problems but they are also concerned about the financial health of their customer so that future financial problems can be avoided.
Relief Programs from Payday Loan Consolidation Companies
Are you sure you are dealing with a reputable and honest company? How can you choose between a debt relief program to reduce your outstanding balance or simply pay off your loan through a long-term loan with lower monthly amortizations?
A debt relief program is often more suitable for individuals with bad credit. People with flawed credit find it challenging to get a new loan that can cover all outstanding payday loans into a single payment.
What Service Should You Look For?
Choosing a suitable company is possible when you choose the right service. You should also set reasonable expectations and avoid asking for inappropriate options.
Benefits and Drawbacks
Here are the things that you should know about eligibility criteria, benefits and drawbacks of loan consolidation and payday debt relief.
Companies Offering Programs for Payday Debt Relief
One of the most effective ways to deal with stressful multiple payday loan obligations is debt relief programs. A company that offers loan settlement services will negotiate with your lenders on your behalf. When the lenders agree to accept at least half of the full amount due, it is considered a settlement.
How Do I Benefit from Debt Settlement?
Borrowers benefit from obtaining a debt relief program because he or she can eliminate outstanding loans for a small fraction of the total loan amount. Once the lender or lenders accept the partial payment for your outstanding debt, collection agencies will stop calling you. You don’t have to renew payday loans and pay hefty charges every time you do.
When you work with a debt settlement company, you can also request for counseling to help you manage your finances better moving forward.
What are the Disadvantages of Debt Settlement?
- Additional rollover charges can accumulate quickly because the payday loan debt settlement takes some time to accumulate in the customer’s escrow account.
- The borrower may have to pay additional taxes due to the forgiven debt reported by the lender to the IRS.
Debt settlement can hurt the credit score of the borrower since settled debt can come up as a negative mark on the consumer’s credit history.
Will I Qualify If I Have Bad Credit?
You’re probably wondering whether you can qualify for a debt settlement program if you have negative marks on your credit reports. The good news is that bad credit history is not a hindrance to getting help when you want to clear your debt.
There are simple requirements to qualify for a debt settlement program:
- The unsecured loan amount should not be lower than $7,500
- The borrower has failed to pay for the last three months
- The borrower is currently experiencing financial difficulty due to unexpected or loss of income
It is important to choose a company in good standing with the Better Business Bureau. Reliable companies will not hesitate to display the Better Business Bureau logo on their site.
Consolidating Debt into One Payment
A debt consolidation loan allows a borrower to merge multiple payday advances from various loan providers into one outstanding balance. You can opt to combine your existing payday loans into a long-term personal loan such as an installment loan. You can also transfer the principal loan amount into one revolving account. Remember that every program has its pros and cons.
Obtaining an Installment Loan to Get Rid of Multiple Payday Loans
One popular option that merges different payday loans from multiple companies is by getting an installment loan. The borrower must adhere to the terms and conditions of the installment contract which states that the fixed monthly payments should be completed after a certain number of months or years. Installment loans are called different names such as:
- Payday advance – paid after a few weeks
- Personal loan – paid over several months
- Automotive financing – paid over a few years
- Mortgage – paid over a few decades
Benefits of Installment Loans When Used to Consolidate Debt
- Reduced monthly payments
- Longer terms if the principal is spread over several months to a few years
- Payments are easier to manage
- Lower interest rates
- Fewer fees to pay, specifically origination fees and rollover charges
Disadvantages of Installment Loans When Used to Consolidate Debt
- The principal loan amount is not reduced, only restructured according to the new terms of the loan
- Longer-term loans require commitment – this can be problematic if the borrower encounters new financial challenges during the installment period
Payday Loan Consolidation and Bad Credit Scores
If you have bad credit, it will be challenging to obtain a new loan, particularly an installment loan. Loan providers will pull out the credit history of loan applicants which means if your credit is bad, you can get rejected instantly.
Loan applicants must also be gainfully employed to be eligible for new credit. The lender evaluates your debt-to-income ratio to see if you can handle the required payments. If you are unemployed or still looking for a job, your loan request can get denied. Borrowers with bad credit should have a steady source of income or possess the collateral to secure the new borrowing.
What are the Different Types of Installment Loans?
There are various types of loans that can be used to consolidate several payday advances into one obligation. Installment loans have longer repayment terms, but the more the loan is spread out over several months or years, the more interest you have to pay.
- Unsecured installment loans -An unsecured installment loan does not require any collateral to secure the loan. The entire loan process can be completed online. Most personal installment loans take 6 months or more to repay.
- Vehicle financing – You can use your vehicle to secure an installment loan. Take note that you are putting your car at risk in case you are unable to settle your debt. The repayment period for vehicle financing is one year up to five years.
- Mortgages – A mortgage is another form of borrowing that requires collateral similar to vehicle financing. In this case, your home is used as collateral to secure your loan. Mortgage interest rates are typically very low, although closing costs are very expensive. Mortgages have the longest repayment period which spans 10 years up to 30 years.
What is a Revolving Account?
Another option to consolidate multiple payday loans in one monthly payment is a revolving account. Deferred payments are one of the features of a revolving account. The most common types of revolving accounts are HELOC (home equity line of credit) and credit cards.
Credit card revolving accounts are balance transfers that allow you to merge multiple payday advances in one payment every month. How does it work?
- You must have enough open to buy to obtain this.
- The balance transfer can be utilized to settle all your existing payday loans which helps to avoid succeeding rollover fees.
- Credit card balances also accumulate interest fast, but the APR is still lower than that of payday loans.
- It may take years to settle a revolving credit card debt.
- Consumers with blemished credit histories may find it challenging to obtain a new credit card.
A HELOC, on the other hand, is another option to consolidate various payday advances so that you only have to pay once a month. How does it work?
- The borrower (you) will use his home equity to open a revolving account.
- The deferred deposit balances are paid off through the funds withdrawn from your home equity line of credit.
- The draw period can last to 10 years.
- Interest charges will apply to the repayment amounts.
- Bad credit borrowers may have difficulty qualifying for a home equity line of credit.
- The customer must meet the eligibility requirements: he or she must be a homeowner; there should be adequate equity; the borrower should be gainfully employed; excellent credit rating is a must.