Loans can become dreadful when they become unpayable—especially payday loans.
Unlike personal loans with lower interest rates, payday loans are far higher. Unfortunately, the interest rate keeps rolling over and accumulating into larger amounts.
It doesn’t stop at not being able to repay the principal loan. With a short term of two weeks to a month, many borrowers cannot repay their payday loans.
If paying back multiple borrowed loans is becoming a challenge, then it’s time you consider debt consolidation. Today, we shall discuss what payday consolidation is and how it works.
What is Payday Loan Consolidation?
Payday loan consolidation means pulling multiple payday loans into a single personal loan. Once you consolidate payday loans into personal loans, the payday loans’ interest rates won’t stand any more. Rather, you’ll pay on the new, much lower interest rate over a long-term period.
How Does Payday Consolidation Work?
Here’s how payday consolidation works.
First, you apply for a personal loan and get approved. Then you’ll receive a large sum of money that you will use to pay off your payday lenders with high interest rates.
Once you’ve cleared your payday loans then you can pay your debt consolidations with lowered interest. Below is a run down on how payday consolidation works:
Step 1: Sum up all the balances on your current payday loans. By doing so, you’ll know the exact amount you actually need to pay off.
Step 2: You’ll have to shop around for a good lender. There are credit unions, banks, and online lenders that offer personal loans with bad credit scores. Carefully compare loan options from different lenders to ascertain the best fit for you.
Step 3: Once you’ve identified a lender whose criteria you fit, you prequalify. Prequalification helps you to know the loan amount, interest rate, and term you qualify for without damaging your credit score. You can prequalify with several online lenders.
Step 4: Once you’ve prequalified, you can apply for a personal loan. In your online application, you’ll have to fill out an application form that requires your personal information like your Social Security number, address, and contact details.
You’ll also need to submit documentation, including proof of identity, employment, and income, and sign the agreement once your loan application is approved. Expect funds as soon as possible, within a week or the same day.
Step 5: Pay up your debts as soon as possible and begin to make plans to pay your personal loan.
Benefits of Payday Loan Consolidation
- Instead of having multiple debts to pay, you’ll have a single personal loan repayment. This will help focus on a particular payment
- Payday loans give you the option for flexible repayment. Rather than having to repay your loan on your next payday, you get to split repayment to 12-24 months or more
- With loan consolidation, there are no rollovers
Conclusion
No matter how large or small your debt is, your only option is to pay up. And the easiest way to do that is through debt consolidation. With consolidation, you get to repay your loans, especially payday loans with lower interest rates.
