Do you have problems with timely payment of your bills and management of your income? Do you struggle with different installments that need to be paid monthly? Do you have too many urgent and unexpected expenses on hand? If the answer is yes, maybe you were already tempted to apply for a payday loan.
Payday loans provide easy access to cash and they have low requirements and fast approval. This makes them dangerous, that is if you do not use them wisely.
Payday Consolidation – what is it?
Payday consolidation is a way to manage all your current payday loans. Instead of paying several installments on different dates, you could take out a new loan or seek out another option to consolidate your existing obligations and to have a single payment to make per month. Payday debt consolidation allows you to repay your previous loans and receive a better interest rate from your new lender. This would provide you with a chance to control your money more efficiently and get rid of debts eventually.
Payday Consolidation Benefits
It is no secret that payday loans have higher interest rates than installment loans. These short-term borrowing usually result in large debts to repay. They may turn to bad credit very quickly. You may easily fall into the debt cycle.
People with bad credit scores are usually the borrowers of payday loans. Payday consolidation loan may be a way out of your financial mess. The benefits of a consolidated loan (or any form of consolidation) include:
– You will have one single lender
– You will have only one installment
– You will have a new payment plan (usually for a longer period than your payday loans)
– Your interest rate will be lower
– You may improve your credit score if you follow your repayment plan strictly
– You will have a chance to plan your finances
– You will reduce the potential risks of debt collectors calling and enforcement
Payday debt consolidation is a serious financial commitment. You should know all the benefits available from the consolidator and ask for guidance throughout the entire process. It is strongly advisable to seek professional opinion before proceeding.
Payday Consolidation Process
Once you decide to seek debt consolidation, you should find a reputable payday consolidator company. Consolidators usually have many options to offer you. When you apply for payday consolidation, you should check the following:
– What documents are required by your intended new lender?
– What is the proposed monthly installment?
– How much is the interest rate for your consolidation?
– How long would it take to pay it off in full?
– When are the fees and charges due?
– Is it possible for fees and charges to be waived?
– Is there any need for collateral?
– Are there any penalty for premature repayment?
After you have choosen your consolidator, you must prepare a list of your payday loans and proof of your income. Usually, most consolidators offer free consultation and review of your documents before signing of debt consolidation. You should know that part of the approval process is evaluation of your credit background, creditworthiness and the number of your payday loans. This evaluation is essential to determine the terms and conditions of your consolidation loan. It should be noted that affordable interest rates come with a longer term of repayment.
What are the risks when consolidating?
If you have bad credit, it is more likely to be asked to provide a collateral. That is also possible when the total amount of your payday debts is huge. When your payday consolidation loan requires a long term of repayment (between 1 to 5, even 10 years and more), this collateral will be at risk until your loan is fully repaid.
You will be probably advised to avoid payday loans while repaying your payday consolidation. Any additional debts may jeopardize the proper following of your debt consolidation payment plan and eventually your goal.
Payday Consolidation Options
There are a few available options for consolidating payday loans. So you need to know what these options are.
Payday debt consolidation settlement means that you re-negotiate your payday loans and/or your bad credit loans under new conditions. The aim is to reduce the total amount of your debts. Most often, this turns your consolidation settlement into short-term borrowing for 2 to 4 years. This payday consolidation option usually requires a lump sum payment, so you should put money aside before going for it. You should note that this type of payday consolidation may lead to an initial drop in your credit score.
Payday consolidation program is a debt relief option that results in reducing of your interest rate in total. The usual term offered for repayment is up to 5 years. Repayment is made in equal monthly installments. The consolidation program is recommended in cases of bad credit because it helps your credit score improvement gradually. It is applicable in cases when the total debt is not too big and the said term would be enough to cover your liabilities in a timely manner.
Payday consolidation loan means transfer of your existing payday debts to a new lender. Depending on the policy of that new lender, you may be asked to secure your consolidation loan with a collateral. Larger debts may require a term of repayment up to 30 years.
A careful and thorough review of your current financial situation should help you decide which option is the best for you. Consolidation lenders may assist you in the decision making.
Tips on payday consolidation
Here are a few useful tips if you are looking at payday consolidation:
– Payday consolidation is recommended before your payday loans become enforceable
– Payday consolidation may reduce the risk of being sued
– Payday consolidation can be a solution for bad credit only if you avoid further debts in near future
– Your income matters
– Your current credit score matters
– You may have to make cutbacks to improve your financial status
– You may be in debt for a longer period than expected, but the result is worth it