Personal Loan For Payday Debt Consolidation – How Does It Work?
Taking out a personal loan for payday debt consolidation is a simple yet proven strategy that has helped many people to break the vicious cycle of debts that payday lending programs are known to create. The best thing about this strategy is that it does not require you to hire a third party, such as a debt consolidation company, to handle things on your behalf. You can do it on your own in an easy and affordable way. Following is a brief rundown on some the various aspects associated with it that you must be well aware of.
Review Your Credit Score
When it comes to using a personal loan for payday debt consolidation, the first thing you have to do is to review your credit score thoroughly. You are entitled to receive at least one credit report free of cost per year from the three major credit bureaus (Equifax, Experian, and TransUnion). Check this report for errors and mistakes. If you find out that certain entries on your report are not correct or are incomplete, you must immediately file a dispute regarding the same. Besides that, if you have a less than perfect credit score, you must also look out for other reasons that are hurting your credit. A few simple strategies to improve your credit score within a few months include making payment toward conventional debts (such as mortgages and car loans) in a timely manner and not making any further enquiry for new credit. This strategy will improve your credit situation.
Block Access Of Your Payday Lenders To Your Bank Account
While you are working on your strategies to improve your credit score so that you can borrow a low-rate personal loan for payday debt consolidation, you must also block access of your payday lenders to your bank accounts. Block all those post-dated checks that you have given to them. When they call you, tell them that you are trying your best to arrange money to pay off the loans and that you need some time. Always remember, non-payment of payday loans or any other debt is not a criminal offence (unless you attempted fraud) and you cannot be sent to jail for this. Besides that, the Fair Debt Collection Practices Act (FDCPA) also provides you the legal right not to be harassed by your lenders or collection agents. If they still harass you, you can file a complaint against them with the state authority.
Payday Lenders Often Do Not Report To The Three Major Credit Bureaus
When it comes to borrowing a personal loan for payday debt consolidation, it is also important for you to keep in mind that non-payment of payday debts are usually not reported to the three major Credit Bureaus that prepare your credit report. Therefore, do not worry about this aspect.
Decide Whether You Want To Borrow A Secured Or An Unsecured Personal Loan
There are two types of personal loans that conventional lenders usually offer – secured and unsecured. A secured loan requires you to put a valuable asset or property (such as your car or home) as collateral against the money you borrow. On the other hand, unsecured loans do not require collaterals. But, it is also important to note that secured personal loans can be availed at a comparatively very low rate. Therefore, the next thing you have to do is to decide which type of personal loan makes the financial sense for you.
Does The Amount Of Loan You Are Borrowing Big Enough To Cover Your Entire Payday Debt?
Last, but not the least, you are advised to borrow a personal loan for payday debt consolidation only if the amount of money is big enough to settle all your payday debts. You may have to face rejections from some conventional lenders, but your options abound. You must shop around for the best deal. It is not very difficult to find an affordable personal loan if you do thorough research and comparison-shopping.
Once you pay off all your payday debts using the money thus borrowed, you will be left with just a single personal loan account instead of multiple payday loan accounts. The best thing is that you no more have to worry about the extremely high rate of interest, hefty penalty charges, and unfair provisions like rollovers. When you use a personal loan for payday debt consolidation, you get a chance to pay off your debts in easy monthly installments over a certain period of time at a comparatively very low interest rate.