Every year, there are many people who struggle with debts such as medical bills, high credit card balances, and mortgages. Such financial struggles often cause exhaustion and frustration. When people have no clue about how they are going to pay their bills. The pressure could be extremely high. If a person reaches the point where he simply is unable to continue making his loan payments each month, that person should look for help. One common solution for people is payday loan consolidation.
Payday loan consolidation is a way for people with bad credit scores to consolidate their debt into a new personal loan. If you are having trouble paying your multiple debts, payday loan consolidation may just be the answer for your needs. Payday loan consolidation, however, also has its risks. Below, we’ll take a look at what payday loan consolidation is, how it works. We will also give you some useful advice if you are considering payday loan consolidation for your debts.
What is payday loan consolidation
Payday loan consolidation is a financial tool that gives you an easier way to repay your current multiple debts by combining them into a brand new, single loan.
The new loan will have a new interest rate, however it should be lower than what you are paying for all of your debts overall. By consolidating your multiple debts, you will only have to focus and keep track of only one monthly payment. Payday loans are usually unsecured, however, taking out a collateral loan is still possible. The collateral for such loan can be your vehicle, house, or some of your smaller possessions.
Why should you consider payday loan consolidation?
MAKES YOUR LIFE A LITTLE EASIER
By combining all your debts into a single, larger loan, you will no longer have to keep track of multiple payments. You just need to focus on just one payment at the end of each month.
The longer you wait, the bigger your debt issues are going to become. The application process for a payday loan consolidation is pretty fast, and so you will be able to quickly start repaying your new payday consolidation loan.
When you consolidate your payday loans, you will get a new loan with an interest rate that is usually lower than the combined interest of all your current loans.
Where can you get payday loan consolidation?
There are different financial institutions that offer loan consolidation services. What you need to do is to find the best financial institution for your specific situation, the one that can give you what exactly what you need, with the best possible terms. Here are some different payday loan consolidation financial institutions.
PAYDAY LOAN CONSOLIDATION COMPANIES
Payday loan consolidation companies do not work with conventional deposits. Instead, they are repaying your debts after which they give you a loan, which you must repay with a payment at the end of each month until you repay the amount for all debts that the company has taken care of. The loan that the payday loan consolidation company gives you comes with a new interest rate.
Normally, payday loan consolidation companies start at the prime interest rate with added 5%. In order to qualify for a loan consolidation with a payday loan consolidation company, you will not be required to have a perfect or even good credit score. However, most payday loan consolidation companies do have some credit limits, usually if your debts are more than $25,000, you will not be able to qualify for a loan consolidation.
NATIONAL AND LOCAL BANKS
National and local banks are alternatives for getting a consolidation on your current unsecured debt. Unlike payday loan consolidation companies, however, such banks work only with people who have good credit scores. That means if you have a bad credit rating, you simply will not qualify for a loan consolidation in these financial institutions.
The interest rate that national and local banks charge for their consolidation loans is also quite high. They start at the same prime rate as payday loan consolidation companies. National and local banks usually require the consolidation loan they are giving you to be repaid within 5 years. However, unlike payday loan consolidation companies, national and local banks are able to handle customers with overall debt as high as $100,000.
PAYDAY LOAN LENDERS
Another provider of payday loan consolidation services are the payday loan lenders. What makes payday loan lenders different from other consolidation loan providers is that they offer short-term loans that generally do not require a credit score check. Payday loan lenders will not repay your multiple debts one by one. Instead, they will help you deal with your current debt in another way.
Payday loan lenders will give you an amount of money that is enough for you to repay your current debts. Of course, payday loan lenders are known to be risky and this is mainly because of the interest rates they charge on the loans. So unless you are all out of options, you would probably want to skip payday loan lenders as your debt relief solution.
The fourth kind of financial institutions providing payday loan consolidation are the credit unions. Normally, credit unions require debt repayment in no more than 5 years just like banks. It is common for credit unions to give certain discounts on the interest rates of their loans to their credit union members. To qualify for a loan consolidation from a credit union, you would need to have a perfect credit score. The consolidation loan limit from credit unions is usually up to $50,000 but can vary depending on the specific credit union and the specific state laws it follows.