Exorbitantly priced Payday Loans can lead to financial problems. An astounding 12 million people get payday loans each year. More than 80 percent convert these loans to new loans when borrowers don’t pay their bills on time.
Payday loan debt relief is possible. This allows you to repay your loan over time. For consumer credit counseling reviews, visit GreenDay.
What is a Payday loan?
Payday loans are short-term loans, usually for $ 500 and less. Payday Loans are short-term loans usually for $ 500 or less.
Payday loans are not reported to credit bureaus, so they may not improve your credit score. Your payments will not increase your credit score. However, if your lender puts your account in collections and defaults, it will be shown on your credit report. This can cause credit scores to drop.
Pew Charitable Trusts reports that only 14% of payday loans borrowers can repay. To help you manage your finances better, a new loan with a lower fixed interest rate can be obtained.
Payday Loan Debt Reduction Works
A debt consolidation loan allows you to consolidate your debts and get a lower interest loan. It can also be paid off over a more extended period, typically 12 – 84 months.
You can search online for lenders that offer consolidation loans. This won’t affect your credit score.
Rather than a payday advance, the debt consolidation loans payments are reported directly at the credit agencies. This can help improve credit scores over time.
The benefits of consolidating a payday loan
A consolidation loan is a way to get your finances in order if you are looking for money for a payday.
- Lower fees: A personal loan may be possible with no upfront costs.
- Flexible repayment terms: Personal loans have repayment terms that range from 12 months up to 84 years. You should pay your payday loan back the next payday. It usually takes between 2 and 4 weeks.
- Monthly installments to be predicted: Personal loans require that you only make one monthly payment until the loan is paid off.
- A credit check is required. Although this might sound like a disadvantage, consolidation lenders want to make sure you can pay the monthly loan repayments.
- There is no reversal. Once all outstanding funds are paid, you can close the account.
The advantages of consolidating payday loans
Although the idea of getting a payday loan is appealing, there are some things you should keep in mind before applying for one.
- It is possible to default on your loan payments. Even if you plan to make your monthly payments on time, unexpected events like a job loss or other obstacles can affect your finances.
- A very low-interest rate may not be available to you. Many online lenders will accept low credit scores. Personal loans interest rates range from 4 to 36%, depending on creditworthiness. Your interest rate may be higher than payday loans, but they are still lower than those offered by payday lenders.
Alternatives to Payday Loans and Debt Consolidation
Consolidating payday loans is not an option. Here are some options:
- Request an extension of the repayment term: Payday lenders in some states may ask you to extend your repayment period beyond your next paycheck.
- You should consider a debt management program. Credit counselors can help with negotiating better terms with creditors.
- Chapter 7 Bankruptcy: This bankruptcy filing can be used to help repay debts. It may then be more difficult to get credit for the next few years.