Payday Loans Debt Consolidation

Crucial Notes About Online Payday Loan Advance debt consolidation

There are several online payday loan advance debt consolidation programs available out there; you search for one in Google and you can get hundreds of them. But, you have to be very careful before you sign up for an Internet-based debt consolidation plan for your payday debts. Following are some of the key points that you must look into thoroughly.

Make Sure They Are Not Fly-By-Night Scams

Obviously, the

first thing you have to do is to make sure that the online payday loan advance debt consolidation company in question is not one of those fly-by-night scams. No mater how tempting and lucrative their debt relief program may sound, you should never pay any fee in advance (even if it is just a couple of dollars). Do not make any payment unless you are sure that the company is going to use the paid sum of money to clear your debts. Read the terms and conditions thoroughly in a written contract, which must be signed by all the three parties, you, the debt consolidation company and your lender.

Willingness Of Your Lenders To Allow Meditation From A Debt Consolidation Firm

Another thing that is very important for you to keep in mind is that online payday loan advance lenders are not legally obligated to accept any debt consolidation offer. In fact, many payday loan companies prefer to take legal actions (such as, lawsuits, which can result in wage garnishments) than working with a debt consolidation

company. Therefore, you are advised to check the mood of your lenders first. Talk to them about it. If they refuse to work with a debt consolidator, you should try to negotiate the repayment on your own. No mater how god negotiators debt consolidators are, if your lenders do not like their meditation, they can file a lawsuit against you straightaway. Such lawsuits can be quite damaging for you, as it may lead to garnishment of your wages or liens on your property.

Understand That Forgiven Debts Are Considered As A Taxable Income

An online payday loan advance debt consolidation company may negotiate a fair deal for you by convincing your payday lenders to write off a significant amount of money from your total debt balance, which might look like a great relief, but you must not forget that all such forgiven amounts of debts are actually considered as a taxable income by the IRS. For example, if you fall into a 20% federal tax bracket and your lenders write off $2000 of debts, you will have to pay $400 in taxes. It means you actually save $1600 only on your debts. Therefore, keep this crucial factor in mind while you are making your calculations.

Understand The Actual Cost Of Plan

Last, but not the least, you must also look into the actual total cost of an online payday loan advance debt consolidation plan. A ten to fifteen percent of commission that debt consolidation companies often charge may look like a small amount of money, but you will have to make sure whether this commission applies to the total amount of debts you owe or the amount of debts they help you to reduce. The later is safer and makes sense. For example, if you owe $5000 of payday debts and their commission is 15% on the total debt balance, it will be $750. If they convince your lenders to write off $2000 and you have to pay $400 in taxes, your actual total saving is $1600 minus $750, which is $850. On the other hand, if they are charging their 15% commission on the amount of debt forgiven, which is $2000 in our example, you will have to pay $300 as their fee and thus you can save $1600 minus $300, which is $1300.

Overall, when it comes to choosing an online payday loan advance debt consolidation company, you do not just have to check their legitimacy, but you must also look into other crucial factors. The idea is to get yourself a clear understanding whether the plan you are signing up for can help you reduce your debt burden or it is going to multiply that burden. Luckily, the first consultation is often offered free of cost by such companies. So, you can take advantage of the same and get all your queries resolved.

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