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How to Consolidate Payday Loan Debt

Taking out a quick loan to get you through until payday may sound like a good idea when you are short on cash; but it can lead to some real financial problems.  Unfortunately, most of the time these loans just turn into a vicious cycle of taking one to make it through the week, only to pay it off and take another to get you through until the next payday. Throw in an unexpected emergency, and you are suddenly stuck with several high interest loans that you don’t know how to pay.

The Benefits of Consolidating Payday Loans

Although it is never a good idea to try and borrow yourself out of a financial mess, when it comes to getting out of payday loan debt, this may be the best answer.  By consolidating those individual payday loans, you can set yourself up with a reasonable payment plan to help you get out from underneath this burdening debt.

Besides freeing yourself from weekly debt payments, a payday loan consolidation can also help you to:

  • Reduce your payments .  By consolidating several loans into one, you will likely have a much smaller payment each month.
  • Reduce your interest . Pay day loans are notorious for charging huge amounts of interest for their services. When dealing with such high interest rates it can be hard to get ahead of your payments to pay off that principle.  A consolidation loan usually features a much smaller fixed rate that is easier to manage.
  • Eliminate late fees and overage charges.   Pay day loans charge exorbitant amounts when you are late making a payment or must extend the length of the loan. Consolidation does not.
  • Avoid creditor calls. By consolidating your pay day loan debt you can keep individual creditors off of your back.
  • Avoid managing multiple bills . For some people, juggling multiple bills is too much to manage. Consolidating those individual loans into one can make bill paying much easier.
  • Build your credit report. Pay day loans usually do not help you build your credit score, but a traditional debt consolidation loan can. This is good news for those who may need to borrow money in the future since your credit score helps to determine how much money you can borrow as well as what your interest rate will be.

What Kind of Payday Loan Consolidation to Consider

When it comes to consolidating your payday loan debt, there are several options to consider:

Pay Day Loan Consolidation Program

A consolidation program works a bit differently than an actual loan in one important aspect: it helps to reduce your interest and your debt.  Consolidation loans programs work like this: your financial helper works with your creditors to help reduce your interest rate; eliminate fees and overage charges and establish a workable pay back plan. Once a plan has been established, you pay the consolidation company a set amount of money each month and distribute it to your creditors.  This allows you to make lower payments to everyone (and avoid overage costs) while working at paying back your entire debt.  In most cases this is the fastest and easiest way to get back on good financial footing.

Pay Day Loan Consolidation Loan

A pay day loan consolidation loan is just that – another loan.  If you are able to swing the payment, this type of loan can help you to completely pay off your pay day loan debt immediately. It works like this: you pool all of your payday loan debt into one single fixed rate loan for a specific amount of time. Then, during the payback period, you make one payment to one creditor until the loan is paid in full.  The benefits of this type of payback plan is that you only have to deal with one creditor per month and the payment is usually much lower than trying to pay back each individual pay day loan.

Tips for Avoiding Pay Day Loans

Pay day loans may look like a great deal when you need the money. Unfortunately, for most people, they are just a way to get so far into debt it is difficult to get out.  While emergencies may arise that require a quick inlay of cash, do everything you can to avoid these high interest loans to keep from getting in over your head in debt.  So, how can you avoid needing cash between paydays? Here are a few tips:

  • Establish a budget .  Most people hate the word budget since it seems to dictate what they can – and can not – buy. Instead of thinking of it in these negative terms, think of a budget as a spending plan that helps to outline what you have available.  If you know you only have $50 available for food purchases each week, then you can scour the sales and plan meals accordingly.  But if you have no idea how much you can realistically spend and splurge on loads of treats, then guess what, you are going to run short before pay day.  A budget isn’t meant to deny you spending pleasure; but it is designed to help you better use the money you do have.
  • Sock away some emergency cash.   Emergencies happen all of the time and that can leave you strapped for cash.  Even if you are barely making it form paycheck to paycheck, try socking away a few bucks for an emergency.  Here’s a simple tactic that often works: at the end of each day throw your loose change into a jar marked for emergencies.  You may be surprised at how quickly those nickels and dimes add up.  This may offer just the safety net you need to avoid a pay day loan in the future.
  • Ask for help.  When you do run short, ask for help. There are plenty of private and public agencies that can help.  Food pantries offer extra groceries; heating assistance programs may help you to get through the winter months and more.  Don’t be embarrassed to ask for help It sure beats getting in over your head in debt!

Once you have made a commitment to stay out of pay day loan debt, then do what you can to consolidate what debt you do carry so that you can pay it off as quickly as possible and free up that extra cash for the things you really want and need.

Category: Payday loans

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