A payday loan consolidation is a way of managing your debts. It’s mainly for those struggling to keep up the monthly payments of two or more over-leveraged loans and who need help getting back on their feet. You can use a payday loan consolidation if you have already taken out a cash advance or have other loans, such as credit cards. The objective is to pay off all your loans by taking out one significant cash advance at a lower interest rate. When you take out this new, larger loan, all the monthly payments go toward repaying the debt in one lump sum rather than spreading it among multiple creditors.
It is widespread to need more cash during any emergency. Sometimes these cash shortfalls are so minor that people can live on a tight budget for a few weeks or months until they get back on their feet. Other times they’re more sudden, like when our car breaks down and requires towing and fixing or when something unexpected happens that messes up our budget in a hurry. That’s where payday loans come in handy: you take out a single loan from a company with high-interest rates, keep it for as long as you require it, and then pay them back within one or two weeks of your next paycheck.
Sometimes, simplifying your finances is beneficial when paying off your debts. For example, loan consolidation is one way to take out a single loan and pay it off with multiple smaller consolidated loans over time. In addition, it could help you avoid interest charges and ease your mind with handling financial obligations.
What Is Payday Loan Consolidation?
Putting all your loans on one loan often means that you have to share the burden of paying them. Imagine having two or three different lenders who each want your money regularly. They send out collection letters, call repeatedly, and are typically pushy about how you need to pay them back. In addition, all these lenders constantly call you at work and on weekends and holidays, getting upset and demanding when you’ll pay up.
At this point, the minute you get a paycheck, even if it’s enough to cover only half of your debt, one lender might go away for good for a bit because people in full paid it off. But, in the meantime, another lender might arrive at your door and ask you to pay off a defaulted debt. These creditors can tie up your money and make you fearful of not having enough cash to afford rent and utilities. That’s why people applying for payday loans or cash advances are advised to consolidate their debts into one loan.
Does it Hurt My Credit?
Some people might be worried that applying for a loan from one company, like one payday consolidation, would hurt their credit score. If you are taking out a loan with interest rates higher than the average, the lender will likely report this to credit bureaus since they’ll have to pay more. But luckily, there are ways around this. First, taking out a loan with a high-interest rate is possible, and you still have your credit unaffected.
Lenders can put things in place so that as long as your balance is paid back within the terms of the contract, you won’t have any damage to your credit score. People can do it by offering safeguards that remove the lender’s obligation to report your negative behavior to any credit reporting agencies. The contract, in this case, would stipulate that as long as the loan is paid off on time and in full, the lender won’t report anything negative about you to anyone.
Why choose Payday Loan Consolidation?
Borrowers who take out a loan from a single lender benefit from having one payment made in total per month. It allows them to be more conscious of paying the interest on their loan without worrying about how much they owe to each lender. And since all your payments are going toward repaying the entire debt at once, you can pay off the first payment before you even have time to consider a second one.
Like any other type of credit, lenders specializing in payday consolidation will require proof that your income is stable and reliable to qualify for their services. You may also have to submit some security deposit for them to process your application. But once you have been approved for a loan and have begun making payments on time, you will probably have minimal credit score impact.
Understanding your options is crucial when deciding the best action to take. When you’re drowning in debt and considering asking for help, always be on the lookout for your options. One lender may be able to take care of all your debts and get them paid off quickly; another might not have the opportunity to consolidate your loans but instead, offer other types of financing that can help you get out from under all these monthly payments.