Payday Loan Consolidation? What You Need to Know


Before you commit, you should understand your options.

For many who find themselves short on cash, a payday loan can be a real godsend. We all have situations arise from time to time when money is short and and our needs are immediate. A payday loan can be an easy and quick solution to bridge the financial gap we find ourselves facing. But this ease and speed comes at a price.

This type of loan should never be considered a long term debt, they are a quick fix intended to remedy a temporary shortfall. The interest rate and other fees are high to begin with. The term is usually to pay it off on your next payday. Whatever the terms, if you fail to meet your payment deadlines, the penalties kick in. With this type of loan those penalties and fees can be significant. It doesn't take much for it so all escalate leaving you in a worse financial situation than you started with.

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But you know this, and if you are reading this, it's likely that either you or someone you know finds themselves in need of what we'll call a payday loan consolidation. You want to gain some control of the situation.

There are a couple of standard approaches for payday loan consolidation. They both have their good and bad points.

Consolidation Services:

For the majority of people who find themselves in this situation, best approach may be to work with on of the debt relief services. Essentially these services will negotiate with your creditors to reset the terms of your loans and consolidate them all into one program. The advisors in the program may also want to counsel with you on wise use of credit and money management... probably not bad skills to learn. Though it may mean a little ding to one's pride, working with a debt consolidation service can really help a lot of people climb out of a financial black hole.

The advantages of a program like this are several:You can wind up paying less than before with lower interest rates. You can payoff your debt more quickly You make a single payment that is then distributed out to you various debts. You begin to build a better credit rating, important for the long run. It gets the creditors off your back You know you are taking a responsible action. In some cases you may be able to get a reduction in your actual amount owed.

The disadvantages are mostly ones of ego and pride:You turn control of this aspect of your financial life to the agency You need to be candid and open about the reality of your financial situation Your credit report may take a temporary ding - but the reality is that if you find yourself needing a payday loan consolidation, you're credit rating is already suffering.

Consolidation Loan:

For some people, definitely a minority, taking out a new loan large enough to cover their combined debt and consolidate it into a single loan (with a single payment) may be a solution. But this can be difficult if you do not have a family member or friend who is willing to work with you, either as a direct loaner, or as a cosigner.

However the advantages of this approach may be:Less intrusive than a loan consolidation service No immediate ding on your credit report The feeling that you've done it yourself A single payment

The disadvantages are:Difficult to obtain It maybe a short term fix if you've done nothing to address the underling financial situation.

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