If you are hard-pressed for quick cash, a payday loan may seem like a good option. But payday loans are hardly a long-lasting solution. Getting a payday loan can lead to a vicious debt cycle. This could be a result of the high-interest rate and very short terms of repayment.
However, debt consolidation may be what you need to give your finances a boost. This is especially true in a situation where you find yourself taking constant loans to offset your debt.
When you talk about payday loan consolidation, it simply means taking a loan to pay off the balance on a payday loan. Payday loan consolidation has a lower interest rate. Getting a payday loan therefore will help you save a significant amount of money in the long run. Another perk associated with payday loans is that it offers a longer repayment term. This gives you more time to repay the loan in monthly installments.
Debt consolidations merge high-interest debts with other debts with lower interest. Consolidating your debt will help to minimize the amount of interest to be paid on a loan. This will help to ensure you pay off such debts faster. Now that you know how consolidation works, how do you go about it?
First, apply for a consolidation loan. You will be required to provide some personal details as well as your financial information. You may also be asked to submit some documents like tax returns, driver’s license, and utility bills. The information you will be asked to provide will depend on the lender. Once your loan has been approved, use the funds to take care of the payday loan. Then repay the personal loan in line with the agreed terms.
It is very important that you first review your financial status to know the personal loan term that would work best for you. A consolidation loan aims to help you to get out of a debt cycle and not run into more debts.
A payday loan consolidation comes with several benefits some of which are:
● Low-interest rate: one of the downsides of a payday loan is the high interest associated with it. Personal loans on the other hand have a lower interest rate and help you to save in the long run.
● Flexible repayment schedule: The repayment schedule for a payday loan is short thereby putting the borrower under so much pressure. Personal loans on the other hand offer the borrower the opportunity to spread out the payment across the months.
● Your financial status is put into consideration: personal loans are given by financial institutions. These institutions care about your ability to pay and would therefore not give you a loan that you will not be able to repay.
● There are no roll-over plans: Personal loans are also known as installment loans. What this means is that you are only allowed to borrow and payback with the interest. Once the loan is fully repaid, the lender closes your account. If you must borrow again, then you will have to apply all over. This helps to curtail your borrowing and ensure you do not get caught up in the debt cycle.
One of the wise moves you can make to get out of the payday loan debt cycle is to use a consolidation loan to offset your payday loan. Take out time and weigh your options carefully. Once you are convinced that you are qualified for such loans and the interest rate is favorable, then go for it.