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Payday Loan Consolidation

There are various companies who can consolidate a payday loans with each using a variety of methods.That is why it is important that consumers understand the differences in every plan.

Debt management, debt settlement, debt relief, and debt negotiation are all different types of plans for harmonizing debt.Each one has certain features that could help you solve your debt problem.

Consumers should decide which company meets their goal of eliminating debt. Some of them maintain in-house debt counseling to assist consumers.

Others refer clients to a network of third-party companies, credit counselors and debt attorneys that offer solutions.

How can you payday loan debt relief program help me?

  • Reduce your monthly repayments
  • Slash high interest rates
  • Waiver crippling late fees and rollover costs
  • Stop collection agencies calling
  • Keep your from being sued
  • Consolidate your Loans and Installment Loans

How To Get Out Of Payday Loans?

  1. Make a spreadsheet of all your outgoings and reduce the lavish expenses
  2. Make cash available from reducing auto expenses or rent/own a cheaper home.
  3. In the evening and weekends get a side hustle to get you a second income
  4. Resist invitations from friends and family to go out or take expensive holidays
  5. Rent out a room. You can significantly cut household bills to pay down your debts

How does it work?

The consolidation company works directly with the lenders to reduce interest rates. They also pay down debts so the additional fees are reduced or completely eliminated.

The companies also offer you counseling how to deal with debts and collection agencies. Finally they put you on a payment plan so you can become debt free.

How debt settlement works in general

Debt consolidation loans are made to merge multiple high-interest loans — like installment loans and payday advances into one monthly payment wit vastly reduced interest. The obvious benefit is you now pay less interest and can manager payments better. This helps you reduce your outstanding debts.

How much will my monthly payments be?

The payments will be determined by your debt size, the number of loans and lenders you owe money to. Your income is the most important factor as this is your ability to pay back your debts

What are the advantages of consolidating my loans?

  • No up front payments
  • Significantly reduce the interest you are paying
  • waiver on all fees that you previously paid
  • Do not have cash taken out of your account by lenders
  • Payment plan is organized in easy monthly payments
  • Less aggressive collection agencies calling you

What are the disadvantages of PDL consolidation?

  • Best if you refrain from taking additional loans
  • Need to control spending to pay down debt
  • You could risk your assets as security
  • The payback term can be many months

Do I get a loan or take a consolidation program?

A debt relief program is a preferable choice as you get a monthly payment plan that you can tailor to your needs. You will not have outstanding  loans or risk your collateral.

A consolidation loan is the worst of the two since you need to put your assets on the line. You secure the loan on any assets you possess.

You can elect for an unsecured plan but then you will be paying additional interest that you probably cannot afford.

Can I go to jail for not paying off payday loans?

No you cannot go to jail for not paying your loans. The lenders will put pressure on you though through suing you court and putting your debts with collection agencies. None of those options are pleasant.

How to consolidate ?

  • The companies that appear the top in google search results are likely to be the best. Payday loan help is a competitive industry and the best companies spend lots on trying to be first.
  • Look at the information on their web page. Are they explaining everything in detail about paying down your multiple loans.
  • If you make a request remember it is not binding. Look at the information and how comprehensive they have answered your issues.

How to get out of a payday loan nightmare

There are not many options. Get more money, or reduce your expenses. Each option is not ideal or painless.

You can get more cash by taking a second job. The internet provides you chances to do additional work anywhere. If you are really lucky family members can help you out.

Spot a good company

A good company will provide clear answers, has a reputation for integrity and success. Their credit counselor should also be trained and certified by a state or national organization counselors.

It is better to know how credit counselors are compensated. Receiving bonuses for selling additional services is a red flag. The company should have your best interests at heart.

Companies can help with more types of debt

Most loan consolidation can help with settling unsecured debts, including credit card bills, unsecured personal loans, medical and hospital bills, department store credit cards, accounts in collections and certain utility bills. Some of them require a minimum amount of unsecured debt of usually $7,500 or more.

Usually, debt companies can’t help with mortgages, secured personal loans or car loans.

Good customer service goes beyond helping their customers pay off the existing debt. It also involves understanding the root cause of the debt and how to avoid it in the future.

Importance of transparency

Many consumers seeking financial help have been exploited by misleading or false promises.

It’s easier to deal with a debt company that is transparent about its practices, terms, and conditions. It should also be willing to provide information to verify whatever claims or guarantees it makes to its customers.

Other indications of transparency may include:

  • Whether they offer loans or only credit counseling and programs like debt management plans or debt settlement
  • A list of all the fees (origination fee, monthly fee, late payment fee) associated with loans or programs and the interest rates
  • The time frame that takes to pay off the debt and whether there is a prepayment penalty
  • The minimum amount of debt to qualify, a minimum credit score
  • Whether you get a personal counselor and ways to interact with him

A reputable company should have no problem putting up all that information on its website.

Consolidation Companies trustworthiness

Although change could happen overnight in the loan market, a company’s longevity and trustworthiness still matter. If you are struggling to keep up with credit card debt or need help with bill management, a company with a track record of success helps building confidence and trust.

BBB accredited payday loan help

BBB accredited – most companies providing debt consolidation are accredited by the Better Business Bureau. BBB lists the number of complaints companies receive and how many of them were resolved. All this information could be very helpful in helping you make a final decision.

FTC rules and regulations

FTC rules and regulations
FTC rules and regulations

How to avoid scams

Consolidation scams

The debt relief business is known for scams. There are several warning signs. Some of them include:

  • Some companies claim to be non-profit but they’re actually a for-profit business
  • Some companies offer guarantees to settle your debt for pennies on the dollar
  • Some of them seek fees for services before signing any written agreement with your creditors
  • Some use aggressive sales pitches, asking you to act quickly on a decision that requires time
  • Some promise a “quick fix” solution when in reality all programs take between three and five years

Options to tackle payday lenders

Payday loans seem like an appropriate solution for people in emergency situations, but often they are the beginning of a downhill financial slide.

A study by the Consumer Financial Protection Bureau (CFPB) showed that 80% of payday loans get rolled over within two weeks, meaning the principal and interest — usually 300% APR or higher — haven’t been paid. And so, the debt grows. The same research showed that 50% of payday loans get rolled over up to 10 times.

Counseling and education

It should be noted that turning to a debt company can have educational benefits for the customer. He has to learn from the experience to avoid future financial problems.

Educating and counseling consumers is the job of the non-profit organizations involved in debt consolidation. They are required by the Internal Revenue Service to provide an educational aspect to their service in order to retain their tax-exempt status as 501(c) (3) organizations.

They offer credit counseling, usually at no cost. Counselors review a consumer’s finances, focusing on the source of financial problems and how managing budgets solve it.

They review this information and offer recommendations such as a debt management plan, debt settlement, or even bankruptcy if needed.

Customers can contact the National Federation for Credit Counseling (NFCC) if they have questions about certification.

Should I use a payday debt settlement specialist?

For example, if the client has enough money but needs more time to pay off, a debt management program is a better choice than debt settlement. However, if he is trying to eliminate debt, a company that specializes in debt settlement could be an appropriate solution.

In order to make the right choice, the debtor should know the definitions for the various programs so that he doesn’t confuse them. It’s important to find the company that offers the exact type of debt consolidation program that he needs, makes him comfortable dealing with their staff and requirements, and educate him so he never has to return.

Relief Programs

loans and relief programs

How will you know if you are working with a legitimate company? How to decide whether to try to reduce your balance through a debt program, or attempt to pay it off with lower monthly payments from a long-term installment loan?

People with bad credit prefer a debt program. For them, it is very difficult to gain approval for a new borrowing account that combines multiple payday loans from different companies into one monthly payment.

The right service

Choosing the right service is often more important and harder than choosing the right company. Many legitimate companies can appear to be scammers if you begin with unrealistic expectations, or choose an inappropriate option.

Pros and cons?

Here are the pros, cons and eligibility criteria for payday debt assistance.

  1. Payday debt relief programs and companies

A debt program is the most direct form of financial help with loan obligations. A settlement company negotiates with payday lenders on behalf of their customers. A settlement occurs when the lender agrees to accept less than full payment.

Initially, the borrower makes regular payments to the settlement company to build a modest amount held in an escrow account. Money held in the escrow account improves the borrower’s bargaining position.

Benefits of getting payday loan help

Benefits of debt settlement

The primary benefit of a debt program is that it allows the borrower to eliminate his obligations for a fraction of what he already owes. The lender agrees to accept partial payment, stops the collections and stops renewing the payday loans and charging rollover fees every pay period.

Paying off only a partial amount is better than paying off the full balance. The company may also assist in developing a debt management plan for managing the borrower’s finances more responsibly in the future.

Drawbacks

Firstly, a solution for payday advances takes time to accumulate sufficient funds in the borrower’s escrow account. He will accumulate additional rollover fees as they often renew weekly or biweekly. They add up very quickly.

Secondly, the lender will report any forgiven debt as income to the IRS. The borrower may need to make an additional tax payment. However, such borrowers often have low incomes and owe very low taxes.

Thirdly, the settled debt may appear as a negative mark on the borrower’s consumer report and hurt his credit score. However, since forgiven balances already appear as late payments, the impact to the score is negligible and will disappear from the consumer report at the same time – 7 years after the date of the first delinquency.

Bad credit qualifications

Bad credit qualifications
Bad credit qualifications

People with bad credit history and negative marks on their consumer report qualify easily for a settlement program because there is no minimum credit score requirement.

The qualifying criteria include several requirements. The borrower should owe more than $7,500 in unsecured obligations, like personal loans, credit cards, payday cash advances, and others. The borrower should be currently behind on payments by at least three months. He is experiencing financial hardship due to a loss of income and/or unexpected bills.

The settlement company of choice should have a positive rating from the Better Business Bureau. Most reliable online companies will display the BBB logo on their website.

The federal government has a list of approved companies providing debt management, credit counseling and debt education. Non-profit status means that the organization enjoys a tax exemption, but it doesn’t mean it is trustworthy.

Merging debts into single monthly payments

These loans allow debtors to combine several loans from different lenders into a single monthly payment. New borrowing does not reduce the principal balance on their obligations. The borrower can choose to combine his deferred deposit transactions into a long-term installment loan, or by transferring his principal amount into a revolving account. Each approach has its advantages and disadvantages.

Installment loans

One option for combining loans from several different companies into one monthly payment is long-term installment loans. The customer has to repay an installment contract with a set number of periodic payments that are fixed. They have various names, each with its unique repayment time frame:

Installment Type Repayment Time frame
1 Payday cash advance Weeks
2 Personal loan Months
3 Automotive financing Years
4 Mortgage Decades

 

Installment benefits
Installment loans benefits

Installment loans for payday loan consolidation

The first benefit of installment loans is their lower monthly payments. They have a balloon payment that comes due in full when the borrower’s employer cuts payroll. That is weekly, bi-weekly, or bi-monthly. The borrower owes the full principal amount which makes the payment quite large.

Long-term contracts have lower monthly payments because the principal is spread over a longer period. There may be 6, 12, 24, 36 or more months to repay what the borrower owes, instead of just weeks. This makes payments easier to manage.

The second benefit is lower interest rates. Weekly payday installment loans have rollover fees which the lender imposes if the borrower can’t repay the entire balance in full. These rollover fees are relatively small, but the annual percentage interest rate is very large.

Long-term installment loans only have one upfront origination fee that is paid once rather than every pay cycle. There are also periodic interest charges but the rate tops out at 35% for the least qualified approved borrowers.

Installment loan drawbacks

Combining weekly payday installment loans into long-term contracts has one important drawback – this doesn’t reduce the principal balance but only restructures the terms of the obligation.

This can lead to problems if the borrower encounters another cash shortage. There is no obstacle for taking out another deferred deposit transaction when the next cash emergency arrives. If that happens, the borrower will owe more money and will have both short-term and long-term installment payments to make.

Bad credit history and consolidating your loans

Borrowers with bad credit history usually don’t qualify for a new long-term installment loan. Lenders always want a copy of the consumer report and frequently deny applicants with low credit scores.

Every applicant must demonstrate sufficient income to handle the monthly payments. The lender will calculate a debt-to-income ratio, thus excluding anyone unemployed or between jobs. People with bad credit must perform extremely well on this test.

Installment loan types

Installment loan types
Installment loan types

There are several types of long-term installment loans to combine multiple payday obligations into a single monthly payment. The longer the repayment term is, the lower the amount the borrower owes each period, but the higher the interest costs will be.

  • Unsecured personal installment loans: They do not require collateral. The application process could be done online. They have a single origination fee and repayment period from 6 to 60 months depending on eligibility
  • Automotive financing: This is a secured installment loan and requires the borrower’s vehicle as collateral. Refinancing is an option if he owes less than the wholesale value of the vehicle. It may be taken out online but may require some verification. Repayment period is between 1 to 5 years
  • Mortgages: These are another form of secured installment loans. They require the borrower’s home as collateral. It is possible to refinance the mortgage or take out a second mortgage. The closing costs are often very high, but their interest rates are the lowest. Repayment period is from 10 to 30 years.

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About Jason Rathman

Jason writes about all financial topics such as loans, debt solutions, and bankruptcy. He is an expert when it comes to subjects like APR, loan fine print, debt collection laws within the United States. With his in-depth knowledge of all things financial, he is a great asset to Greendayonline.

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