If you are thinking about payday loan consolidation then you might be concerned about some of its facts and myths. Today, we are going to cover some of them for you.
What is a Payday Loan?
A Payday loan, also called short term loan, is a type of loan where people borrow money for a short interval of time. It is a small loan of about $500 which is borrowed from lenders, as per government laws. This loan will help you when you’re totally out of cash and need some quickly.
Payday Loan Consolidation
Consolidation means combining all the personal and payday loans into one loan with an extended duration of paying back. There are many types of consolidations, like payday loan consolidation and student loan consolidation.
But payday loan consolidation is not as easy as it looks. Below we have listed some common myths about payday loan consolidation.
The Myths:
Consolidation Is Not Legal
Some people think that consolidation is illegal, this is totally false. Consolidating debt is not illegal at all; it is 100% legal to consolidate your debt.
Don’t Skip A Payment
Many people think that if they skip a payment then this is not a big issue. But remember that it is a big issue to skip the monthly payment in consolidation. Normally, we think it is manageable and that it is okay, but this will affect your credit score badly and it will be a part of your credit score for life. This will also be a reason for a lender to call in the loan, in this situation, your agreement will be cancelled and you have to pay back the entire amount immediately.
Borrowing Limits
Once you request to borrow money, lenders determine how much they’re able to lend to you based on your total income. You have to choose the amount that how much you need to borrow; the lender can increase the amount by 30% of the actual income you produce. That’s why you should borrow the money you need at that time, so you can easily manage the amount you borrow.
Fluctuating Income
Another thing to remember, if you have a job with fluctuating income, then it will be hard to manage to pay the monthly payment. The solution to this problem is very simple, make a debt bank account where you can set up your scheduled monthly payment. This account will help you pay back when your account is clean but the debt amount will be paid directly.
Repaying Limit
If you try to put more money in the agreed monthly payment, this will result in a penalty. This information is necessary if you borrow money from lenders. To avoid a penalty you should only pay the monthly payment. Contact your lender if you have a bigger amount and you want to pay, or simply contact a counseling agency like Solid Ground Financial for help.
