Payday loan debt has always been the most dangerous form of consumer debt, that anyone can witness.
The high-interest rates, and so many service fees associated with it, just make it more confusing and difficult to pay off within its short loan term.
Many people bend toward this form of debt to get temporary relief from their financial problems. And, most of them end up surrounded with multiple payday loans, where heavy interest charges become double or triple the size of the original amount.
Despite of all the warnings we, the financial advisors, give to the general consumers every single time, they still deliberately fall into the never-ending payday loan trap.
Then, when the ultimatum comes, and these debtors see that the $300 loan amount has turned into $1200, lightning strikes their head, leaving them helpless.
No matter whatever they try, the payday loan debt starts to grow at a huge rate. And, a killing sense of repentance seeps into these vulnerable folks.
This post is designed and developed to help out these people, who are struggling to pay off their payday loan debt, and have by far not got any suitable debt relief option to ease out their debt situation.
If you are one such person among this group of debtors, who is searching for various debt payoff strategies, then this post will support and guide you through the most appropriate payday loan debt elimination.
Take your time, and read this whole article to see the facts, that you got to keep in mind, for we will be discussing payday loan debt consolidation in full detail.
Our aim is to make you wise and well informed about the best way to pay off your payday loan debt.
Even if your debts are in collections, and you are harassed by frequent collection calls, then also this post will aid you about tackling your debt accounts.
Therefore, take the right move and understand this post-out-right.
We will be encircling our conversation around debt consolidation solely, with occasional touches on other debt relief options.
This article will by no means endorse escaping debt payments or anything that violates the legal regulations of debt collection.
It will, in its true nature, teach you about how to pay off debts smartly and conveniently.
Keeping all these rules and protocols in mind, we will continue with this blogpost.
What is debt consolidation, and is payday loan consolidation any different?
When you are talking of debt consolidation, let me tell you that this is probably the best way to pay off debts.
It has the potential to keep your credit report intact and can actually boost your credit score with time.
Unlike any other debt relief process such as debt settlement or bankruptcy, here you will be paying off your debts in full.
This ensures that the debt accounts once paid, will be reported to the credit reporting bureaus, as “debt paid in full” by the creditors, instead of “debt account settled”, or “debt account forgiven”.
Debt consolidation is the process that brings multiple debts into one single debt, at an interest rate, much lower than the individual rates applicable on each of the existing debts.
Debt consolidation from the credit card balance transfer perspective:
Used for example purposes only)
Debt consolidation is explained best with an example. One easy consolidation method that many people use, is credit card debt consolidation.
In other words, it is referred to as a credit card balance transfer.
Here, multiple credit card balances are transferred into one single card. Once this transfer happens, the debtor has only one card to pay off at a marginalized interest rate.
That’s the easiest example of debt consolidation in a nutshell.
How debt consolidation works, in general?
When you are planning to consolidate your debts, you got to keep one thing in mind, that it works only for unsecured debts.
To your relief, payday loans are unsecured debts, and you can surely consolidate them. But, consolidation only makes sense when you have multiple debts.
You can never do consolidation for one single debt. Thus, only consider debt consolidation if you have more than one payday loan.
Accurately speaking, you can do debt consolidation all by yourself. All you have to do is take out a consolidation loan, large enough to pay off all your existing debts.
Then you will be having only one loan to pay off.
This consolidation loan is none other than a personal loan, taken out for the purpose of consolidating debts.
However, if you believe that doing debt consolidation on your own is not your cup of tea, then you should take the help of a debt consolidation company.
Once you approach the company, it will contact your creditors and ask for certain modifications to your loan term and interests.
After which, you will be making a single monthly payment to the company, which in turn will disburse the money to the different creditors you have.
It’s just as simple as that.
How payday loan debt consolidation works?
It works the same as any other debt consolidation you wish to do. But, payday lenders are on top of the notorious list of creditors.
They are reputed to use all unethical means to collect the total debt amounts from their consumers. And, due to this, professional payday loan debt consolidation has become popular more than ever.
Eventually, professional payday loan consolidation has its own unique benefits. The biggest of it all is that the debt consolidation company negotiates with the payday lenders to bring down interest rates and if possible waves away most of the late or penalty fees associated with the loan amounts.
The next advantage is that you stop getting all calls and letters from collection agencies if your debt accounts are with the collections. Doing consolidation yourself will never let you have this peace of mind.
Therefore it’s better than you do professional payday loan consolidation and saves money, on the total amount owed.
Here’s how I myself benefitted from professional payday loan consolidation in the past:
I was once on the verge of filing bankruptcy due to the several amounts of debts, that too of different types, I had.
I was carrying one heavyweight mortgage, three 1-year-old payday loans, 4 credit cards – with 2 being maxed out, and one misused personal loan.
I was unable to figure out which one to get rid off first. I started to attend uncountable financial therapy and counseling sessions.
From everywhere I went, I was coming back hopeless.
But then I met this friend of mine, who was associated with Oak View Law Group and got me an appointment with one of its financial coaches.
This financial expert evaluated my whole situation like no one else. He made a series of calculations, called my creditors one by one, and finally came up with the most sensible solution.
He advised me to first tackle the payday loans, and leave beside everything else for the time being.
I entered into a payday loan consolidation program with this company. They negotiated with my creditors and scrapped down my overall payday loan debt from $3000 to $1100. That was a great relief.
All I had to do was give the company $90 each month. Then within 1 year, I cleared all my payday loan debt.
Along with, over the course of 3 years I came out debt free, having got rid of all the unsecured debts with the help of debt consolidation.
However, I had to downsize my mortgage by selling off my house and shifting to a low-cost property. But, that was worth it, as nothing seems to be sweeter than a debt-free life.
What are the basic facts to keep in mind while doing payday loan consolidation?
Even though things might sound so easy with debt consolidation, but it can be a bit tricky if you don’t have full knowledge of this subject.
- Don’t fall prey to fraud debt consolidation companies:
There are many debt relief companies that dupe people in the promise of making them debt free. Quite often consumers become victims of such companies, where not only their debts go unpaid, but also they lose big amounts of money in the shape of service fees.
You better look out for that.
An original and authentic debt relief company will never charge you a fee unless they get you some official comment or agreement from the creditor’s end, that a debt negotiation is in progress.
Moreover, a trusted debt relief company will always keep you well informed about your case from time to time.
Any company that is avoiding to inform you about the proceedings of your case, or trying to be of elusive nature overall, may not be a registered law firm or is some kind of pseudo debt relief companies.
- Debt consolidation is not debt settlement:
Yes, this misconception should go away immediately.
The settlement is about trying to decrease the debt amounts, while consolidation is arranging a suitable debt payoff plan. Both are different.
Even still, if possible, the debt consolidation company might try to negotiate the debt amounts with your creditors.
If the company is successful in doing so, then you will be undoubtedly notified about it.
However, you can rest assured that most or all of the additional fees associated with the payday loans, may get eliminated.
This, on the other hand, doesn’t mean that the original amount or the minimum interest charges on the payday loan will get waived off.
- Debt consolidation can increase your credit score:
When you are doing consolidation, you have one great chance to increase your credit score forever.
As I have mentioned before in this post, debt consolidation gives a positive reporting to the credit bureaus. This reporting makes up a great deal of your credit score.
You have a credit history and credit reputation. And, they both are highly enhanced by debt consolidation.
Therefore, tell the consolidation company to inform your creditors for reporting the debt as “paid in full”.
- Professional debt consolidation provides you with a budget:
A budget has always been the ultimate step to debt relief.
When you are going for professional debt consolidation, the company will revise your debt situation and your personal income, so as to determine a well-planned budget.
This budget will be used by you, to arrange the monthly payments you will be doing to the company.
This budget is also helpful to keep your finances on track, till you get rid of all your debts completely.
A glimpse on doing payday loan consolidation all by yourself:
For achieving a high success rate while doing consolidation all by yourself, there are a couple of things that you should abide by.
First of all, you need to take out a personal loan or a consolidation loan that has an amount equal to the sum of your total existing payday loan debt amounts.
By total, I don’t mean only the original debt amounts.
All the interest charges and the service fees, or late payment fees are also to be included.
Then you start to call your lender one by one and offer them a lower amount in contrast to the total amount owed.
So, if you owe $1000 on one payday loan, tell the lender you are ready to pay off the loan at $700, right about now.
Do a little negotiation and you will definitely be able to save some money. Like this pay off each of the payday loans you have and clear out those accounts once and for all.
After you are done with the payday loans, you will be only left with this new loan that you have taken out.
You can then pay off this loan as per your convenience. But, that doesn’t mean you again start to default on this loan!!
That’s all I could have said about payday loan consolidation in brief.
Still understand this simple fact, that payday loans are hungry money eaters. The more you are late in dealing with them, the fatter will they start to grow.
It is not uncommon to see a payday loan taking up interest rates as high as 300% at times. Keep a check on that.
Consult a good debt consolidation company and discuss the problems in every minute detail. To understand and know more about debt consolidation in its conventional sense, please refer here.
Keep coming back for more.