Payday loan lenders are drastically increasing in numbers. They know how money situations can put people in tight corners, so they make their offer enticing so that customers can’t refuse.
Many are stuck trying to pay off debts. If you are in this category, you need to take responsibility now, or else a payday loan will bring a negative toll on your finances.
If you are willing to take responsibility and save your finances, follow on with this post and find out how.
What is Debt Consolidation?
Debt consolidation is the process of using a new loan to pay off multiple debts.
You might be thinking: “I’m already in a loan mess, how can I get a new loan to pay my debt?
This sounds confusing, right?
Now, here’s a rundown of what debt consolidation is about.
Debt consideration combines multiple debts into a single loan. Combining your debts into a personal loan lowers the interest rates and payments you have to make.
Here’s a little illustration:
Assume Zack has numerous debts to pay, and he’s confused about how to offset them because he has very limited funds. Not forgetting the exorbitant interest rates payday loans come with.
He goes to a loan expert to seek financial advice, and this is what he’s advised to do:
- First, he’s to list out all his debts on paper, and arrange them according to their interest rate; from the highest to the least
- Then, he adds them up to one amount
What Zack just did is that he consolidated his debts into a single loan i.e. a personal loan. Next thing is to apply and get a consolidation loan to pay off his debt.
Instead of having multiple debts to pay, Zack will now have a single personal loan to pay.
- Once his payday loan debts are merged into a personal loan, he’ll have to shop around for a good loan company/lender
- The loan company will give him a Personal loan to settle his debts, which he will pay back in monthly installments
Reasons Why You Need To Consolidate Your Debts
Lower Interest Rate
With payday loan consolidation, you won’t need to pay a higher interest rate anymore. Instead, you’ll pay a lower interest rate and on installments at a longer repayment term
It is much easier to pay a $1500 personal loan in 12 months installment, and at 10% interest than it is to pay $400 at 30% interest in a month.
Organized Payments
Keeping track of multiple loan payments, interest rates and due dates can be overwhelming. But if you consolidate your debts into a single loan, you’ll only have to worry about one loan repayment. This will get you focused on making monthly installments in time.
Boosts Your Credit Score
Your credit score will get a boost if you continually make timely payments on your debt consolidation loan.
The higher your credit score, the higher your chances of getting favorable loan conditions in the future.
Conclusion
By merging multiple debts into a single loan using debt consolidation, it’ll save you on interest rates, reduce the number of payments you have to worry about, and set your finances on a new course.
This is what debt consolidation will do for you and much more.
