Payday loans help many people get free of financial emergencies every year. However, it can be hard to repay those loans as debt might accumulate over time. Taking more than one loan at a time might make it even harder to keep up. This is why you may need payday loan consolidations.
What Are Payday Loans?
Payday loans are quite expensive as they are high-interest and have extremely short repayment periods. This is why they can be quite difficult to repay in the time period that is assigned to you. It leads to bad credit scores and more financial problems in the long run.
These loans are typically short amounts taken for a small period, for example, a loan of $500 to be returned on the next payday. But they usually come with higher interest rates and additional fees for late repayment.
However, there is definitely a way out if you have accumulated too many payday loans. Borrowers who are unable to repay payday loans may choose to consolidate all of those loans into one major loan they can focus on.
What Are Payday Loan Consolidations?
Payday loan consolidation involves combining several different, smaller payday loans into one new personal loan that you can pay off in monthly installments. This consolidated loan typically has a much lower interest rate, but it may initially lead to a dip in your credit score.
Don’t worry! You can make up for that initial dip by making those loan repayments on time. Since the consolidated loan has a lower interest rate, your monthly repayments might be much easier to manage. It is also easier to follow one loan payment schedule than multiple ones.
Steps to Follow Before Applying for Payday Loan Consolidations
It is important to consider certain things before you apply for a consolidation of all of your loans. You must;
- Be able to qualify for a personal loan.
- Confirm you are able to pay the monthly installments of the new plan.
Payday loans usually have interest rates that may go above 400%. Compared to that, personal loans may only go up to 36%. This is a big relief for people who have been paying payday loan interest rates for a while.
Moreover, when you consolidate a loan, you no longer have to keep worrying about the repercussions when you miss the due date for your monthly installments. You may be left paying back the loan for a longer while, but the more repayments you make on time, the better your credit score.
How Do Payday Loan Consolidations Work?
Thinking of applying for a payday loan consolidation? You may need to visit a bank, credit union, or online lender. Here are some of the steps you must follow;
1. Planning Ahead
Before applying for your payday loan consolidation, consider adding up your payday loans and figuring out how much you owe. Payday loans come in different sizes, so you may have a loan worth $300 and another one worth $1,500. You might need to calculate accordingly.
Once you get the final amount, you will need to figure out whether you will be able to pay back the loan installments with interest rates. Some guesswork might be required. However, if you refer to a professional payday loan help service, you may be able to get a much better idea.
2. Compare Loan Options
Before you apply and go through the hard inquiry (which is going to affect your credit score), you must shop for your loan. Go through all the loan options presented to you and figure out which one is best for your financial situation.
If you have a great credit score, visit banks and credit unions and ask for more information. If you don’t have a great credit history, perhaps an online lender may be able to help! With online lenders, you can also choose to pre-qualify, which allows you to check whether the loan terms are something you are up for.
3. Start the Process
Once you are done with all the research, you are finally ready to apply for the loan. You can finally fill out that application but be sure to enter the right information and gather all the documentation first!
Once you get approval and sign the loan agreement, you can receive your funds. The time period will depend on the kind of lender you have chosen. From there onwards, the process is quite simple. You must start by paying off each individual lender and clearing those debts.
When you are in the clear, you can make a new plan which focuses on how you are going to pay off your new loan. Remember that if you are applying for a loan with an online lender, missing your payment deadlines can lead to a greater fee. Plus, they are going to charge you higher interest rates, so it is important to carefully evaluate your financial situation before you accept the agreement.
Why You Need a Professional for Your Loan Consolidation
Solid Ground Financial can help you apply for loan consolidation by choosing the best option. They can assist you with the evaluation of your financial situation and add to your knowledge.
If you want to do this right this time, asking a professional for help is important. Payday loan professionals have years of experience in their fields and can gauge your eligibility before you have to apply. They can also guide you to the best option.
Final Thoughts
Payday loans can be hard to manage for some. However, if you have been struggling to pay off multiple loans for a while, perhaps consolidation of those loans is a viable solution. Contact Solid Ground Financial to learn more.
