Among many ways to borrow money, a Payday loan is very expensive compared to other borrowing ways. The ones who borrow money through payday loans usually find themselves stuck in a never-ending debt cycle. The answer is simple and payday loan takers find it daunting to make heavy repayments. Therefore, if you see yourself falling into the death web of a payday loan, shift towards payday consolidation. How is a payday consolidation loan better than just a payday loan? Well, payday loan consolidation will assist you in avoiding heavy debts and guide you to not pay higher interest rates on each debt.
How Does Payday Loan Consolidation Work?
Normal-day loans, such as payday loans, can be very stressful. A payday loan will seem helpful initially, but as you gradually dive deep, financial distress will surround you.
Once a lender lends the loan, you must pay it back with one payment. You must thoroughly review the terms before getting the loan, as your repayment conditions can differ from those of other borrowers.
Ways of Paying off a Payday Loan
There are three main ways one can pay the loan off:
- A check
- An online transfer
- Directly transfer from your bank to your lender’s bank
However, the loan lender can withdraw money from your account if you don’t repay it within the given period. As most borrowers cannot pay back within time, they end up reborrowing. One way of lightening the burden is by consolidating your loans. It converts loans with high-interest rates into loans with lower interest rates.
A payday loan is to be paid off within a week, but as you can extend the repayment date, you might keep increasing the time of repaying the loan. This causes a lot of debt to accumulate. For example, if you borrow $200 for two weeks and cannot return it within two weeks, the lender will put an extra charge on the previous interest rate. This can continue for months. The lender will have no issues increasing the due date, but the amount accumulating will put you in a financial crisis. To end this continuous cycle of the loan payment, consolidate your payday loans. Consolidating will allow you to repay the loan at whatever time you want through monthly installments.
Also Check: Top 5 Benefits Of Getting A Payday Loan From A Direct Lender
Other Advantages of Payday Loan Consolidation
Besides decreasing your interest rate, a payday loan consolidation allows you to save money instead of going into financial distress. You can save money by giving high-percentage interest loans away and getting lower interest rates. But this technique works when you take a loan from your bank, lender, or credit union. This loan will have a return time of between 1-5 years. It doesn’t matter whether your credit history is high or low; you can still apply for a consolidated payday loan. However, if the credit score is lower than required, you will get a high-interest-rate loan.
Even if you’re not eligible for a payday loan consolidation, your options don’t end. You can go for PAL, which has a 28% APR. This will help you pay off high-rated interest loans. Moreover, you will have at most six months to pay off this loan.
Also Check: What Is Cash Advance And How To Get One?
When to Consider Payday Loan Consolidation?
If you cannot repay the loan quickly and want to renew the payback day repeatedly, you should consider debt consolidation. Debt consolidation will help you during hard times like losing a family member, getting divorced, or getting laid off from your job. Moreover, if your lender is giving you a tough time by harassing you, consolidation is the best option out there.
Finally, you should go for consolidation when you can trust someone with the consolidation process. Remember, there is no shame in seeking payday loan help. After researching, if you think consolidation of a loan has benefits that outweigh other benefits, go for consolidation.
Also Check: All You Needed To Know About Personal Loans
Payday loan lenders profit significantly by increasing the due dates and charging a higher interest rate. It is essential to do proper research because the consolidation of loan companies will cheat you, and you might bear more loss than gain.
Also Read: How Online Payday Loans in Ontario Work?
Images by Karolina Grabowska and Mikhail Nilov