Debt Consolidation Loans For Payday Loans – You Have Two Options
Broadly speaking, you have only two options when it comes to getting debt consolidation loans for payday loans – first, you can borrow a big conventional loan yourself that should cover your entire payday debts, and second, you can sign up with a debt consolidation agency and obtain a loan from them. There are certain pros and cons associated with both these options. Make sure you do a thorough research in advance in order to make sure that the option you are opting for makes the best financial sense considering the specific debt and financial situation you are currently in. The following information should help you make an informed decision in this regard.
Signing Up With A Debt Consolidation Agency
When you go for the initial consultation with a financial organization that specialize in debt consolidation loans for payday loans, the agency first do a thorough review of how you are handling your finances, such as whether you follow a budget plan, how much money you earn every month from regular income sources, how much your monthly expenses are, whether there is room to down your expenses and save some money to contribute toward debt repayment, and even whether your financial life is affected by other issues also, such as mental illness, job loss and other such things.
The counselor handling your case will prepare a detailed evaluation report and then they will suggest you the different types of options in debt consolidation loans for payday loans that you can go for. They will explain the pros and cons of various plans so that you can make an informed choice.
For example, it can be a plan, where you do not really borrow a new loan; instead, the agency just manages your debts requiring you to make a single consolidated monthly payment to them while they take care of the rest of the things, such as disbursing respective payments to your creditors. Alternatively, the agency may issue you a real loan that allows you to may off all your debts. This way, you will end up with just one loan account instead of multiple payday loan accounts. Besides that, the agency also allows you to repay in easy monthly installments.
However, the later option seems to be viable only in a situation when you cannot qualify for a conventional loan on your own, such as because of poor or bad credit. It is very important for you to keep in mind that the debt consolidation loans for payday loans offered by these agencies are never free; you must expect to pay a certain amount of fee to even those agencies that claim to run their business as a no profit organization. Besides that, the consolidation loan offered by these agencies charge a much higher rate of interest as compared to traditional loans. Some agencies may even require you to put a valuable asset or property as collateral against the money you are borrowing. This can be risky because if you start making default on the consolidation loan, the agency may sell off your property to recover their money.
Borrowing A Conventional Loan On Your Own
If you are considering getting debt consolidation loans for payday loans on your own, you again have two options – first, you can get an unsecured conventional loan (such as, a personal loan), and second, you can obtain a secured conventional loan (such as, a home equity loan). You are recommended to consider each and every aspect associated with both these options thoroughly before you choose to go with one.
In order to obtain an unsecured loan, you must meet some basic eligibility criteria; the most important of which is having a decent credit score. If you have bad credit, it will be very difficult for you to borrow unsecured debt consolidation loans for payday loans. However, there are still several sub prime lenders out there that may still consider you an eligible applicant, but they will charge you extremely high rate of interest. It is important for you to note though that even though the rates are high, it will still cost you almost nothing as compared to the amount of interest you are paying on your payday loans (usually at a 3-digit APR).
You can qualify for low rate conventional loans if you agree to put a property as collateral. This is your second option – a secured loan. For example, if you are a home owner and are fortunate to have enough equity in your home, you can consider obtaining a home equity loan. Those who do not own a home can consider putting other assets as collateral, such as a car. The best thing about these types of debt consolidation loans for payday loans is that they charge interest at a very low rate and even other terms are also quite convenient and affordable for the borrower. But, the problem with these loans is that they put the collateral property at risk. If you miss a couple of installments, you may lose your home or whatever property you have put as collateral. Therefore, you have to be every careful with your decision. Go for it only if you are confident that you can make the repayment without any difficulty.
Last, but not the least, no matter which type of debt consolidation loans for payday loans you choose to go for, you can make things much more convenient for you by incorporating other strategies, such as following a smart budgeting plan and saving extra money to build up an emergency saving fund so that you can avoid payday loans in future.