Are you tired of dealing with overwhelming payday loan debt? Instead of rolling the balance over on the next due date because you can’t afford to pay it off, consider a personal loan to consolidate the debt. You could get a new loan with a far lower interest rate and affordable payments so you can break the chains of payday debt bondage sooner than later.
What Are Payday Loans?
Payday loans are short-term loans for small amounts, up to $500, designed to cover financial emergencies or help consumers meet immediate cash needs. They’re generally due on your next payday or within two weeks and come with steep interest rates, often in the triple-digits.
While these loan products are costly, they appeal to individuals with less than perfect credit and minimal savings. Many consumers also turn to payday loans if they can’t get approved for a personal loan elsewhere and need fast cash.
Pros And Cons Of Payday Loans
Take a closer look at the pros and cons of payday loans:
Pros of Payday Loans
- You won’t be subject to a credit check when applying for a payday loan.
- The eligibility criteria are far laxer than you’ll find with traditional loan products.
- Most payday lenders offer rapid approvals and same-day funding.
- Rollovers or renewals are available in select states if you’re unable to repay the loan by the due date.
Cons of Payday Loans
- Payday lenders typically require you to write a post-dated check or provide your banking information and authorize an electronic withdrawal for the outstanding balance on the payment due date.
- Triple-digit interest rates are customary with payday loans.
- Most are due within two weeks or on your next payday.
- You could rack up excessive fees with the lender and your financial institution if your funds are insufficient on hand to make your payment.
- Rollovers or renewals could cost you a fortune and keep you in debt for an extended period.
- Your credit score could take a hit if you default on the payday loan and the lender reports the delinquent account to the three credit bureaus or sells it to a collection agency.
How Payday Loan Consolidation Works
If you’re feeling entrapped by payday lenders, consider a personal loan to consolidate the outstanding balances into a new loan product with a lower interest rate. Consolidation loans are available through traditional banks, credit unions and online lenders.
Benefits Of Consolidating Your Debt
It could be worthwhile to consolidate your payday loans and other outstanding debts for many reasons.
Lower Interest And Fees
The interest rate you get will depend on your creditworthiness. Even if you don’t have good or excellent credit, you could get approved for a consolidation loan with a higher interest rate. Still, it’ll likely be far lower than what you received when you took out the payday loan(s), and you won’t have to worry about pesky payday loan fees.
Predictable Monthly Payment
You’ll get a fixed monthly payment that’s easy to work into your spending plan. Plus, it’ll likely be more affordable as the balance will be stretched out for several months or years.
Longer Repayment Terms
The repayment period on most debt consolidation loans is between one and five years. This gives you more time to repay what you owe and avoid scrambling to come up with the entire loan amount in just a few weeks to prevent rolling the balance over.
How To Get Help Consolidating Your Debt
Maybe you’ve tried getting approved for a debt consolidation loan but haven’t had much luck. Whether your credit score is too low or the lenders feel your debt load is too high and worry you won’t be able to make the monthly payments, there’s still hope.
You can hire a professional debt settlement company to negotiate settlements for a fraction of what you owe. This approach makes it possible to get out of debt in as little as 12 months.
