Due to the high interest rate and short repayment terms of payday loans, it can be difficult for borrowers to get their money back. Many payday loan borrowers will roll over payday loans to pay off existing payday loans. This can lead you to paying higher interest rates and creating a vicious cycle.
Consolidating payday lenders means borrowing money in order to repay multiple payday loans. This will stop you from re-borrowing high-interest debt. A personal loan or a loan that is not payday-related can provide relief from the need for payday loans. You can compare the options below and find out more about payday loan consolidation at https://oakparkfinancial.com/payday-loan-consolidation/.
How does consolidation of payday loans work?
Payday loans are for people who need quick cash and do not have credit checks. Payday loans can be difficult to get rid of due to their high annual percentage rate (APRs), and short repayment terms.
If borrowers of payday loans are unable or unwilling to repay the loan, they may be eligible to get a second loan. This is known as “rolling over”, and it can lead to higher fees. Payday loans can become more expensive and harder to repay.
Consolidating payday loan debts allows borrowers to combine several high-interest payday loans into one type loan. This could be a personal loan, or a payday alternative.
Consolidating payday loans: What are the pros and cons?
Consolidating debt can help pay off payday loan debt. These benefits are worth a closer look:
- Lower APRs and fees. Payday loans come with high APRs. They can go as high as 400% on a two-week loan. Combining with other types of financing can save you money. Personal loans charge lower origination fees that payday loans.
- Expected monthly payments and a longer repayment term. Payday loans can usually be repaid within two to three weeks. The payday loans and personal loans can be repaid in as little as two weeks. This gives borrowers more control over their finances.
- Avoid wage garnishment or delinquency Payday loan defaults may lead to wage garnishment, and the lender taking your case to court. Consolidating payday loan debts can help you avoid collection agents calling.
- Set a deadline for your debt. This is an alternative to lines of credit and payday loans. There are no rollovers. Once you have paid your last monthly installment, you can get rid of your debt. This will keep you motivated to get rid of your debt as soon and as possible.
Consolidating payday loans debt has its downsides.
- More stringent eligibility criteria:Consolidating payday loans with debts at lower interest rates is a positive. Low rates are not always easy to obtain. At least fair credit is required to be eligible. For interest rates to be lower, however, excellent credit or great credit are required. Your debt-to income ratio (DTI), can also affect payday loan consolidation applications.
- There are minimum amounts you can borrow. A personal loan or consolidation loan may be required to borrow the minimum amount.
- You should avoid borrowing money to pay off your debt.
Payday loan consolidation may not be the best solution to pay off payday loan debt. There are many options available for consolidating payday loan debt. However, you should also consider other options.
Consolidating your debt through payday loans
There are several options for consolidating debt. Use the table to compare all options.
| Pros | Cons | |
|---|---|---|
| Alternative loan for payday (PAL). | There are two types small loan options (PALs 1 & 2): PALs 1, 200 to $1,000 loans that are repayable in one-to six monthsPALs 2 up to $2,000 loans that are repayable within a year. PALs IV are $200 to $1000 loans which can be repaid between 1 and 3 monthsPALs 1: $200-$1,000 loans, which can be repaid over 1 to 6 monthsPALs 2: $200-$1,000 loans, which can be repaid over 1 to 12 MonthsPALs 1: $200-$1,000 loans.PALs 2: up to $2,000 loans which are refundable within 1 yearPALs III are $200-$1,000 loans. PALs IV: Up to $20 application fee and loans of at least 20% | Only through federal credit UnionsPALs II require that credit-union members be established for at least one month prior to applying for a loan. This is not the case for PALs III. |
| Personal Loans | Fixed terms and APR ensure that your monthly payments will not be affected by changes. Funding is usually fast and often within one week. Although secured personal loans may be possible, there is no collateral. | Borrowers with low credit may pay higher APRs. Personal loans range in amount from $1,000 to $1,500. A $1,000 personal loan is possible with an origination fee of between 1% and 8%. |
| APR credit Card Offer | Credit-worthy borrowers might be eligible to receive a 0% APR offer for up 20 months. Most cases do not require collateral. | Excellent credit is required to get approval |
How to get payday loan relief with no consolidation debt
Consolidating debts with payday loans is not an option. You can get payday loan relief without adding new debt. Here are some tips to help you get payday loans relief.
A nonprofit credit counselor can help you manage your debt.
You may be unable to qualify for the payday loan consolidation options. However, you can still get help with payday loans. A lot of non-profit credit counseling provides free advice and educational material. You can also get low-cost (or free) debt management services such as for payday loans. Credit counselors can help to evaluate your options. They might also be able offer you debt management plans to help you repay the debt quicker.
Locate a government-approved credit counseling organization
- Visit the S. Department of Justice site
- Apply for accreditation with the Financial Counseling Association of America or the National Foundation for Credit Counseling.
Ask your lender about an extended payment plan
Lenders may offer relief for payday loans. If borrowers are in financial difficulties, lenders might offer a reduced-cost extended payment plan.
The terms of your extension depend on where you got the loan. Get in touch with your payday lender to find out more. One year is enough to extend a payday loan.
Borrow from family members and friends
A payday loan can cost as little as 100 dollars. If you are able to borrow the money from friends and family, it is a better choice than taking out a consolidation loans with a lower monthly minimum or rolling over the payday lender.
Remember that borrowing money from family members could be costly and lead to a relationship breakdown. Trust is essential for financial transactions between close family and friends. It is important to have a plan in place for repaying the money you borrowed.
| Pros | Cons |
|---|---|
| Assistance from certified experts or professionals at low or no cost. You can extend your repayment term with no penalty. | This is not feasible for every borrower in every situation. Payday loan relief that promises debt relief is available for upfront fees should be avoided. |
