Payday loans provide fast availability of funds for emergencies, but it indirectly milks your finances dry. Most people make the mistake of taking a payday without a proper understanding or repayment plan and eventually get stuck.
The major disadvantage of a payday loan is the high-interest rate and additional payment charges. This makes the loan almost impossible to be repaid.
According to the Consumer Financial Protection Bureau, more than 80 percent of borrowers who rolled over loans owed much more than the amount they initially borrowed.
What Happens When You Can’t Repay Your Payday Loan?
When you cannot pay your loan, your lender rolls it over as a new loan while you clear the interest charges it incurred. With the ”roll over”, you are given a new deadline to pay up. This does not in any way guarantee help with payday loans. Instead, it keeps you trapped in a cycle of unending debts.
How Can You Get Help with Payday Loan Debt?
The best way to get help with payday loan debt is by applying for a payday loan consolidation or payday loan relief.
First, you must understand what payday loan consolidation and relief are.
A payday loan relief is a debt settlement scheme that relieves you of your debt by standing on your behalf to your lenders. While a payday loan consolidation consolidates, that is combined all your debts into a single loan called a personal loan.
Steps Payday Loan Consolidation Companies Take to Save Your Finance?
You’ll have to Qualify
To qualify means to meet the company’s requirements. These requirements include;
- A good credit score
- Proof of income
- Financial statement and other financial documents
Your Payday Loan Debts Will be Merged
All the payday loans you owe will be combined to become a single loan known as a “personal loan”. This means you won’t have to pay high-interest charges. This way, your finances won’t be drained.
You’ll Receive a Loan Settlement Fund
Once you qualify, you will be given the money needed to pay your lenders.
You’ll Make Simple Monthly Payments
Once your payday loan debts have been swapped to a personal loan, Your debt consolidation company will help you break down your debt into a simple payment plan. You’ll then start making monthly installments with a lower interest rate.
How To Identify The Right Payday Loan Consolidation Company for You
- Their interest rates should be lower than what you currently pay with payday loans. The repayment plan should be flexible too.
- It should be a legit company with a reliable banking or credit union. Do not fall for scammers in the name of a debt consolidation company.
- The right payday loan consolidation company will also help educate you on payday loan processes and lending laws. They’ll also provide personal finance advice for your finances.
- Clearly understand and compare the company’s cost of borrowing and then find it suitable for your financial situation. According to FCA regulation, payday loan companies must show the price of their products in the form of an Annual Percentage Rate (APR), i.e., there should be no hidden cost or fee.
Conclusion
Payday loans come with exorbitant interest rates and fees that can keep borrowers trapped. Thankfully, with the right payday loan consolidation company, you can save your finances by swapping several high-interest loans for one loan with a lower interest rate.
