There are various companies that have payday loan consolidation services and financial services 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 debt consolidation 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.
The debt consolidation company works directly with 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 on how to deal with debts and collection agencies. Finally, they put you on a payment plan so you can become debt-free.
Debt consolidation loan is made to merge multiple high-interest loans — like installment loans and payday advances into one monthly repayment period 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.
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
A payday loan 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 payday loan consolidation 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.
No, you cannot go to jail for not paying your debt consolidation loan. 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.
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 with chances to do additional work anywhere. If you are really lucky family members can help you out.
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 counselor.
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.
Most loan consolidation can help with settling unsecured debts consolidation loan, 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.
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.
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.
A reputable company should have no problem putting up all that information on its website.
Although the 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 – 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.
Payday loans seem like an appropriate solution for people in emergency financial 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.
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 advice, 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 program, or even bankruptcy if needed.
Customers can contact the National Federation for Credit Counseling (NFCC) if they have questions about certification.
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 agreement 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.
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.
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.
Here are the pros, cons and eligibility criteria for payday debt assistance.
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 payday 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.
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 a 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.
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 payday 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 on the score is negligible and will disappear from the consumer report at the same time – 7 years after the date of the first delinquency.
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.
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 repayments. 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.