People who need fast cash to pay unavoidable expenses and emergencies resort to taking loans. As helpful as loans may be, they are not charity—you have to pay back when due, with respect to the stipulated terms and conditions.
However, your inability to repay the loan becomes a big challenge when it accrues to a larger amount. No matter how small or big your debt is, your only solution is to pay it up. And the easiest way to do that is by combining the multiple debts to become a single loan, termed ‘debt consolidation’.
If you’re finding it challenging to repay multiple borrowed loans, then it’s time you considered debt consolidation. This article will enlighten you on debt consolidation and why it can be your best friend.
Let’s dive in!
What is Debt Consolidation?
Debt consolidation is a personal finance process that entails taking out a single loan to offset several other loans.
However, you must qualify to get debt consolidation. What this means is you’ll have to meet your lender’s minimum requirement, which includes—a good credit score, proof of income, and financial documents, amongst many others.
Benefits of Debt Consolidation
Some benefits of debt consolidation include:
- Debt consolidation gives you enough time to repay your debt. You won’t have to bother about late payment
- It improves your credit score
- Debt consolidation lowers your interest rates
How to Use Payday consolidation for Payday Loans
Payday loans are one of the easiest ways to get quick cash. But as easy as it may be to get your payday loan approved, these loans are a quick way to get into debt.
Payday loans are expensive, with high-interest rates—triple-digit annual percentage rates—and a brief repayment period.
When you cannot repay your payday loan, your interest rate rolls over. The more you’re unable to repay your loan; the more it piles up until it becomes bigger than your initial loan amount, making it more expensive to repay.
This is where payday loan consolidation comes in. Payday loan consolidation helps with payday loans.
Payday loan consolidation means rolling up several outstanding payday loans into one single loan (personal loan), which you can repay in monthly installments at a lower interest rate.
Ways To Consolidate Your Payday Loans
If you’re swamped in payday loans and looking for a way out, then you could try payday loan consolidation. Here are a few ways you could consolidate your payday loan:
- Apply for a personal loan through banks, credit unions, or online lenders. Once you qualify for the loan (the exact amount you owe on your payday loan), it’s been approved
- You will be given the requested amount of money to settle your lender. A personal loan gives you the advantage of monthly installments with a lower interest rate, unlike payday loans
- You can use a home equity or 401(k) loan to consolidate your payday loan. A home equity loan leverages the equity from your home as security for getting a loan. While A 401(k) is your retirement savings account disposable for your use
Conclusion
With payday loan consolidation, you don’t have to stay stuck in the payday loan trap. Rest assured, payday loan consolidation is the best relief you can get.
Once you’ve identified with a lender, ensure you meet the minimum requirements to qualify for debt consolidation. And endeavor to repay what you borrowed in due time.
