Payday Loans Debt Consolidation

Pay Loan Consolidation Through A Home Equity Loan – Should You Go For It?

Though there are plenty of options available out there for you if you are considering using pay loan consolidation to pay off all your payday debts in one go. For example, you can replace your multiple payday loan debts with a single unsecured personal loan, a secured consolidation loan, or a credit card cash advance. Other options may include getting a high amount of advance from your employer or borrowing from your friends, colleagues and family members. Among all these options, the cheapest one is a secured consolidation loan, which usually means a home equity loan. If you are a homeowner and have a high amount of equity in it, you may consider utilizing that equity and turning the same into cash so that you can pay off your payday debts. Following is a brief rundown on how it works and the different factors that you need to take into your careful consideration in order to make an informed decision whether it is safe for you to go for this option.

Replacing Payday Loan Debts With A Home Equity Loan

When it comes to using a home equity loan for pay loan consolidation, you must first understand entire the process. There are certain pros and cons associated with it that you must be well aware of. In this method, you first apply for a home equity loan. Though conventional banks and mortgage companies should be your first choice for it, but you may still like to know that even many payday loan debt consolidation agencies also offer these such loans these days. You can request free quotes from all of them. A thorough comparison of the different quotes will help you choose the cheapest deal. You will have to make sure that the amount of money you are borrowing as part of this loan is big enough to cover the aggregate total outstanding balance on your multiple payday loan accounts. This way, when you receive the money, you can pay off all your existing debts in full. You will thus end up having just one debt account, where the loan terms are quite easy. After all, a home equity loan allows you to make the repayment in small installments on a monthly basis over a certain period of time. Since it is a highly secured loan, even the interest rate is also very low, which can range anywhere between 6% and 16% per annum. Besides that, even the penalties for late payments are not very high. In fact, you can even get an option to pay just the amount of interest for the first few months until you get some control of your finances.

The biggest risk factor involved with the method of using a home equity loan for pay loan consolidation is that you may lose your home if you fail to make the repayment on this loan due to any reason. Therefore, you are strongly recommended to go for it, only if you are 100% sure that you can make the timely payments. If you are determined and financially disciplined, there is no reason why this consolidation method should not work for you.

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