Be debt-free: payday loan consolidationLeave a Comment
We know, seeking help with a staggering number of payday loans can be tough. After all, who wants to show our vulnerable sides to others? However, did you know that Americans can become debt-free within six to 18 months of getting a debt consolidation loan? Before you dismiss a debt consolidation loan as just another loan, read on to find how this total debt makeover can actually help you free yourself from ever-increasing payday debts.
What is payday loan consolidation
Payday loan consolidation means that you combine your several payday loans into one new loan with a new interest rate and a new monthly repayment amount. The ultimate aim is to reduce the amount of interest (you know how high interest rates are for payday loans) paid, get rid of the stress of having to manage multiple debts and payments as well as increase your focus on paying off all debts as you now have only one monthly repayment to manage.
Process of payday loan consolidation
The goal in consolidation loans is to get the one with the lowest possible interest rate. Here are suggested steps in going about consolidating your payday loans:
1) List all your loans, interest rates and monthly repayment amounts for each.
2) Explore your consolidation options, be it unsecured or secured.
3) Do your research and look around for a reliable and reputable loan consolidating company. It’s best to work with one that has an ‘A’ listing from the Better Business Bureau (BBB).
4) A consultant from the loan consolidating company will negotiate with your creditors on your behalf for a lower interest rate and monthly repayment amount. Under most circumstances, payday lenders will agree to a lower monthly repayment as that’s better than not being able to recover their loans at all. In some instances, the loan consolidating company may be able to significantly slash your interest rates by 30%-50%.
Advantages of debt consolidation loans
Consolidation loans could be your first step in getting rid of all debts and shaping up financially.
– Less stress
As the loan consolidating company will help negotiate with your debtors on your behalf, you don’t have to be personally involved in the stressful and confusing process. Moreover, there are also no more irritating debt collection calls with a consolidation loan.
– More savings and cash flow
With a lower interest rate and smaller monthly repayments from a debt consolidation loan, you’re likely to be able to save more and less likely to be driven to take up various payday loans in times of need.
– More focus
The single monthly repayment means that there are no multiple bills or repayment schedules from various loans to take care of. You now can concentrate on working towards one repayment amount every month.
You may also consolidate your student loan
According to uscollege.com, the national student debt in 2015 reaches an outrageous $1.2 trillion (a figure that outruns auto and credit card debts) with some 40 million people across the US carrying the burden of their education loans. For student loans, only federal education loans, not private education loans, are eligible for student loan consolidation. However, there are private consolidation companies that offer consolidation of private student loans.
How to choose a good loan consolidation company
As with a lot of things online, the standard of debt consolidation companies also varies greatly. So do your due homework before going with one. Here are some tips which may help you identify the good from the bad.
Better Business Bureau (BBB) rating
The BBB is a non-profit organization in America and Canada which collects and offers complimentary business reviews. To find out more about about consolidation company which looks credible to you, simply do a search on the BBB website. If the search yields no rating or reveals a bad rating, move on.
Check that it’s registered
A company serious about portraying a credible image and instilling confidence in its customers is likely to be registered with either The Association of Independent Consumer Credit Counseling Agencies or The National Foundation of Credit Counseling. If the debt consolidation company you’re looking to work with is registered with either one of these agencies, look out for feedback.
They try to sell you something else
Sometimes, companies with ulterior motives only start showing their true colors when you interact with them personally. They may have advertised payday loan consolidation services, but start talking about or try to persuade you to opt for something else as soon as you meet them in person. They may talk about ways to reduce your overall debt. Be aware that this isn’t debt consolidation. Debt consolidation is simply moving the current loan to a new one with a different set of terms – it never involves negotiating for a lower principal debt amount which is debt settlement. Debt settlement is a dangerous affair. If you don’t mind bringing irrevocable damage to your credit score, that’s the way to go.
They’re aggressive and makes you feel uncomfortable
Professional debt consolidators take time to listen to you and access your financial needs. They should not be pushy simply because they want you as a new customer. Also note that once you enter into a debt consolidation agreement, changing your mind and wanting out is not possible. That makes taking out debt consolidation loans very important financial decisions. So all the more you should avail yourself to more credible options and not settle simply because people in the debt consolidation company are pushy.
Payday loan consolidation isn’t the ultimate solution
What’s the root cause of having several loans so much so that you cannot keep up with their repayments and require debt consolidation? It has a lot to do with your spending and saving patterns. Debt consolidation will not solve your financial issues in the long run. Taking positive actions to change undesirable habits that draw you into debt is a more sustainable solution.