Have you recently taken out a payday loan with overwhelming fees that have made the repayment process nearly impossible? Payday loans are particularly tricky to pay off since the borrowed amount is owed back in a full lump sum. For that matter, some borrowers tend to miss their original payment date and get charged extra penalty fees, making the second payment even larger. In other instances, debtors anticipate their inability to meet the loan repayment and thus renew the loan date by only paying the interest of the original amount. With this, many find themselves constantly stuck in a never-ending debt cycle.
How Do Payday Loan Consolidations Work?
With debt consolidation loans, you will be able to take out a lower interest rate cash advance in order to cover your existing high-interest debts, such as payday loans. After you have covered the hard part, you will be set to repay your consolidated loan over a longer period of time. Working with installment loans, the monthly payments are proven to be more controllable than short term loans.
Just like any other loan, you must first conduct adequate research to perform a well-informed decision. One of the primary precautions that you need to take into account before embarking into the loan path, is to make sure you are financially capable to meet all the monthly payments.
Pros of A Payday Loan Consolidation
If you feel stuck in your payday loan debt, then consolidating this loan can help you put your finances back on track. For many benefits, payday loan consolidations are proven to be highly sought after.
- Lower fees. Some consolidation loans are accompanied by lower fees than usual, and in other instances, you can find loans with no fees at all.
- Flexible terms. Typically, repayment terms for payday loans are within the month or whenever your upcoming paycheck arrives. Whereas, most payday loan consolidations are spread over several months to help you meet all your dues.
- Foreseeable monthly installments. With these loans, your monthly payment remains constant along with a fixed interest rate. This allows you to better manage your financial state knowing your monthly dues fully, without any surprises.
- Mandatory credit check. Although this may push most customers away, this procedure is merely taken into account to guarantee the candidates' capability of monthly payments. Credit checks are implemented through the lenders to confirm the candidate’s income source, examine past credit reports, and convey your overall financial status.
Cons of A Payday Loan Consolidation
Without a doubt, all loans carry with them disadvantages that render them somewhat unattractive. Although some instances leave us without a choice but to get a loan it is highly advisable to be aware of what you are getting into, even the cons.
- Missing a payment on your consolidated loan may do more damage than perceived. Although a concrete repayment plan may be set for you to meet all your future obligations, unexpected accidents may throw you off tracks. With these loans, any failed attempt to fulfill the monthly obligated payments could potentially harm your credit score value. In even worse scenarios, the lender may resort to sending your debt to collections.
- Some cases may not be granted low-interest rates. In most cases, your credit score plays an important role in determining the interest rate allocated to your consolidated loan. Although low credit score files are not turned down, they are however faced with a much higher interest rate than others. These rates are still relatively lower than that of a payday loan, which can also be seen as an advantage.
Substitutes to Payday Loan Consolidations
Upon evaluating the pros and cons of the payday loan consolidation it can seem like a hectic solution to undertake. If you do not feel that this loan is the right way for you, then there are other alternatives to consider.
- Request an Extension to Your Existing Loan.
Make sure you communicate with your payday lender to work upon receiving an extension for your debt. By prolonging your loan this will give you more time to gather the needed funds to cover. However, be informed whether this extension is granted along with a fee.
- Apply A Loan Management Strategy.
When you employ the aid of debt management planners, you work closely with consultants that negotiate to get you better loan terms from your lenders. These services subject your financial situation to a thorough examination, helping you locate your monetary strengths and weaknesses.
Consolidating your payday loan may be a wise move to assure monetary safety and a well-guaranteed loan relief for the long run.