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Payday loan debt consolidation: What are the benefits and drawbacks of this program?

Payday loan debt consolidation is considered to be a viable option for people who are unable to manage their multiple loan payments. After the recent economic meltdown, many people relied on credit cards in order to manage their unexpected expenses at the middle of the month. In order to manage the household expenses, the consumers used their cards exhaustively. Therefore, these people continuously use their multiple cards but fail to make payment on time. In this situation, these consumers incur insurmountable amount of debt. As a result, they enroll in a payday loan debt consolidation program to get rid of their financial owes. However, before enrolling in a consolidation program, make sure you are aware of the benefits as well as drawbacks of this program to avoid complications in future.

Here are a few advantages as well as disadvantages of payday loan debt consolidation program:

Advantages:

1. When you consolidate your multiple credit card debts, you can actually manage your payments more easily. You can consolidate your multiple bills into a single and affordable monthly payment. When you consolidate your high interest debts with a new loan, this can help to save a lot on interest rate as well as extra fee.

2. Remember debt consolidation cash loan is unsecured by nature, therefore it has lower risk. You are not required to take out the loan against collateral, so you have no risk of loosing your property, even if you fail to pay back the loan.

3. When you make a single monthly payment, you can keep track of your payment. Therefore, you can get rid of your multiple loans with the help of a debt consolidation cash advance. Once you payback your multiple payments, you can manage your payment on one lump sum loan.

4. Make sure you calculate the annual percentage rate charged on the debt consolidation cash advance. Try to evaluate the rate of interest charged on your current loan. It is beneficial to take out a debt consolidation loan as it is comparatively cheaper than interest charged on your credit cards.

5. Anyone can apply for a debt consolidation cash advance and it is available with ease. However, you need to qualify for the loan and collateral is required if you want the loan on favorable terms. In order to apply for the loan, you are required to provide an identity/citizenship proof, your age proof certificate and your current pay stub as your income proof.

Disadvantages:

1. You can further complicate your financial situation if you are registered with a fraud payday loan consolidation lenders. Therefore, you need to be careful in order to distinguish between a fraud and an authentic lender.

2. People often misuse the money they take out in order to consolidate their debts. So, you need to exercise financial discipline when you take out a new loan to consolidate your current debts.

3. You need to payback on time when you consolidate your debts. If you default on your payments, then the accruing high interest on the principal balance can make it unaffordable to pay back. Therefore, it can be difficult to come out from the vicious cycle of debt.

Therefore, you need to evaluate the pros and cons before you sign up for a payday loan debt consolidation. You can take right decision when you are aware of the benefits and drawbacks of payday loan debt consolidation.

Qualifying Criteria for Payday Loan Consolidation

Economic times are tough.  Gas prices, grocery costs, housing are all on the rise. Payday loans can be a short term solution until you realize you have too many and do not have enough money to cover them.

Thousands of people take out payday loans every day, expecting to be able to pay them back quickly but fail to do so when unforeseen circumstances come up. When people are unable to repay their payday loans on time, the penalties and interest really start to pile up. A short term payday loan suddenly turns into a long term financial obligation.

Payday loan debt consolidation can help with this problem. Consolidation will not quickly erase the debt but can make payments easier by combining the debt. This should result in reducing late penalties and interest. In some cases, companies will help the applicant settle for less than what is owed.

There are some things that are needed to qualify for payday loan debt consolidation. While the exact policies vary from company to company, the general eligibility requirements are quite similar.

The first requirement is age. Anyone wanting to consolidate their payday loan debt must be at least 18 years of age. Next, most debt consolidation companies will require that you have a certain minimum number of payday loans and amount outstanding. Generally, they will require that you have at least two loans and a minimum outstanding balance of $1,000. The main reason for this is that payday loan consolidation companies are businesses like any other and need to make a profit. If you do not meet these requirements, it may be very difficult for you to find a company willing consolidate your loans.

Applicants must also be US citizens and have lived at their current place of residence (city and state) for a certain minimum number of years. The exact requirement varies from state to state. Different states have different laws governing payday loans. The laws of the state the applicant lives in are the ones that are applicable and not the laws of the state the consolidation company is located.

Applicants must still be able to pay the debt that is owed. Debt consolidation companies will require that applicants are employed and/or have a source of income such as child support, maintenance, interest from CDs, interest from stocks, etc. Applicants must also be able to prove that they meet certain minimal monthly income requirements to pay the amount agreed upon. Each company uses its own formula to come up with this minimum amount. It is usually based on the amount of debt owed and the time allowed to pay off the debt.

If you meet the general requirements listed above, you should start looking for payday debt consolidation companies that  meet your needs.  Additionally, you should check each individual company for their specific requirements as those will vary from company to company.

The Payday Loan Consolidation Process

We have already seen how payday loan consolidation can come as a welcome relief when you are caught in a vicious cycle of high interest, fees, and other penalties when making payments towards the different payday loans you took out.  Instead of paying multiple high interest payments each month, you make a single, reduced payment at a significantly lower rate towards a new consolidated loan.  But once you’ve made a conscious decision to consolidate, how do you go about doing it?

For starters, you need to work out exactly how much you owe and to whom.  Make a list of all you payday loan debt accounts identifying how much you owe and to which lender.  Since you may have a number of consolidation options to choose from, it is always best to have a good handle of what type of debt you currently have.  Consolidation programs generally work well when your debt is substantial although having a lot of debt is never a good thing!  Next, consider whether you can consolidate your payday loan debt via a secured loan.  This may, for example, be an option if you are a homeowner.  Getting a secured loan means that you’ll likely be charged a much lower interest rate but you do have to put up something of value (like your home) as collateral.  Moreover, if you have good credit, it will likely work in your favor as well.  Look at your credit scores from the three major credit bureaus and ensure they are based on correct and up to date data.  If there are any errors, have them corrected.  A strong credit rating means that you will likely pay less interest even with an unsecured loan.

Once you’ve decided to consolidate, there a couple of different options you can choose from.  You can either consolidate all your  loans on your own by merging you current debts into a new loan or work through a payday loan consolidation company.  You should only attempt to consolidate on your own if your debts problems are relatively simple and manageable; otherwise, it is best to make use of a debt consolidation service.   In the latter case, the consolidation company takes on the responsibility of dealing with your existing lenders to come up with a new consolidated loan for you under certain revised conditions. You then make a single payment each month towards the consolidated loan at a much reduced rate and are shielded from collection calls since the consolidation company will then deal with your lenders.

If you use a debt consolidation company, you need to bear in mind that there is a fee associated with the convenience of using such a service.  In some cases, it can be substantial.  Some companies charge their fee based on a percentage of your outstanding debts but others may charge a flat fee as well.  Before you sign on with a consolidation company, the first thing you should do is evaluate whether you are able to afford your monthly payments having accounted for the fees the consolidation company will charge you.  Make sure that you understand the terms and conditions surrounding the fees that you will be charged and that they are fair and affordable.  Next, make sure that the consolidation company you are planning on doing business with is legitimate and reputable.  There are a lot of scam companies out there so make sure you thoroughly research the company you are considering and they are listed with the Better Business Bureau (BBB).  Lastly, when the debt consolidation company you opt for presents you with a contract, make sure you thoroughly read through and understand all of its terms and conditions.  Make sure you ask questions if certain things are not clear.  Sign only when all your questions and concerns have been clarified and you are confident of being able to make your monthly payments on time under the new repayment plan.

Choosing the Right Payday Loan Consolidation Company

Once you have decided to consolidate your payday loan debt and have familiarized yourself with the process involved, you need to find a reputable payday loan consolidation company to work with.  In this article, we will summarize some of the essential things you need to look for  when choosing the firm you do business with so that it acts in your best interest and truly helps you get out of debt faster.

Firstly, you need to be aware that not all the credit counseling agencies out there are legitimate.  Some may be outright scams while others may not have your best interests at heart.  Many are simply out there to generate as much profit for themselves as possible rather help you get out of debt.  Some even operate under “non-profit” labels but work in ways that help their “associates” make as much money from you as possible.  Be wary of such unscrupulous organizations.  You should also avoid companies that make any outrageous claims about the length of time within which they can help repair your bad credit and/or offer “quick fixes”.    As a good rule of thumb, always make sure that company you intend to do business with is accredited by a reputable third party such as the National Foundation of Credit Counselling (NFCC) or similar national organization.  As part of your due diligence, you should also contact the Better Business Bureau (BBB) to find out more about the credit counsellor you are planning on working with and whether there have been lots of complaints about them in the past.

Having separated the legitimate companies from ones that are scams, the next thing you must carefully evaluate is the debt management plan you are presented with.  In particular, you should make sure that the plan allows for a timely disbursement of funds to your creditors.  Some companies may take your consolidated payment for the first month but, instead of distributing the funds to your creditors, keep it for themselves by calling it a “fee” or “donation”.  To avoid such scenarios, make sure you ask for a copy of your policy and read through it carefully to make sure there aren’t any hidden clauses and other gotchas.  The agency must be clear about the fees they will charge you and how much of your monthly payments will be used to cover them.  Make sure you ask questions if anything is unclear.  Ideally, the consolidated payments that the debt consolidation company receives from you each month should be disbursed to your creditors within a couple of days.

Another thing you should look at when considering the plan you are offered is whether it is tailored to suit your specific needs or whether it is a generic plan designed to fit everyone.  Opt only for the one that works best for you.  The agency you choose to sign on with must also be able and willing to work with ALL your creditors and not just some of them or ones that they have a certain type of association with.  Lastly, make sure that the money you pay to your consolidation company is well protected.  Your money could, after all, be lost due to fraud, mismanagement, or if the consolidation company itself undergoes financial difficulties.  Do not hesitate to ask them if they have insurance for money they receive from clients.

Picking the right consolidation company is a challenging yet essential task if you are serious about consolidating your payday loans becoming debt free.  It requires research, due diligence, and some plain old fashioned common sense.  We hope, however, that this article has provided you with the tools needed to get you on your way.  Good luck and happy hunting!

How to Secure a Consolidated Payday Loan with Bad Credit

Many people take out payday loans as a short term solution to financial problems. Due to unforeseen circumstances, however, paying those loans back can sometimes become a very difficult task. If an applicant makes late payments, then penalties and interest compound the loan and it seemingly grows bigger and bigger.

When a borrower decides to consolidate their payday loans, there are certain criteria that he or she must meet in order to do so. If the applicant has a history of bad credit, the process can be considerably more difficult. Securing a consolidatied payday loan with bad credit is not impossible but it will require some work.

There are a number of companies that specialize in offering payday consolidation loans to people with bad credit. It does, however, take some time and effort to find them. It is important to be certain that the company one chooses is a reputable one. People in desperate circumstances can easily become victims of scam artists. When you find a prospective company to do business with, be sure to check with the Better Business Bureau to ensure that the company you selected does not have multiple complaints filed against them.

The applicant must convince the debt consolidation company that he or she is trustworthy and can repay the loan. This can be achieved by producing verifiable proof of monthly income such as the salary you receive from your job, interest from stocks or bonds, or alimony payments. It is even better if you can put up some type of collateral to help secure a loan. All sorts of things can be used as collateral such as cars, real estate, jewelry or any expensive asset. It is important, however, for you to not put up assets that you are not willing to risk losing. Even the best laid plans can run amuck which is why it is very advisable to NOT put up the home you live in or a vehicle that is your only means of transportation.

If an applicant has no collateral, it is still possible to obtain a payday consolidation loan. In many cases, applicants with bad credit will have to agree to pay a higher rate of interest. If the applicant has defaulted on previous loans, they are a greater risk to default again. If the applicant agrees to pay a higher interest rate, however, then the loan company protects its interest. Greater interest helps insure that the loan company has made some money in profit if the applicant defaults.

Applying for a payday debt consolidation loan with bad credit takes patience. Applicants will have to apply at multiple places but can save time by applying only at ones that advertise that they work with people with bad credit. Once a loan is secured, the applicant must be sure that they are absolutely certain they can live with the terms so as not to default on the loan. Defaulting on a loan will further damage an applicant’s credit and can cause them to lose valuable possessions in the process. Careful budgeting on the applicant’s part is, therefore, very important.