Posts Tagged ‘consolidating payday loan debt’

Consolidating Payday Loan Debt – How To Go About It?

If you owe multiple short-term cash advances and are facing great difficulty not only in paying off the same but also in managing the same, you should consider consolidating payday loan debt. When you go for it, you can easily replace multiple monthly payments with a much more affordable single consolidated monthly payment. There can be a wide array of several other benefits also. For example, once you sign up with this program, the agency you sign up with will work as a mediator between you and your creditors. You will not be receiving harassing collection calls anymore. Both debt management and debt repayment will become a much smoother process. The agency also negotiates with your creditors and tries to get the late fees and other penalty charges waived off. Depending upon your specific financial situation and the kind of debt burden you have, the agency may even convince the creditors to reduce the rate of interest and/or increase the repayment period. Besides that, since the financial counselor that is appointed for your case is also highly knowledgeable about the laws regarding payday loans in your state, they will make sure your rights and interests are well protected and that you are not being treated unfairly or illegally by your lenders. Following is a brief rundown on how to go about it.

Know How Much Debt You Owe In Total And To Whom

When it comes to consolidating payday loan debt, the first thing you have to do is to prepare a list of your debt accounts mentioning it clearly how much you owe to which lender. It is very important for you to keep in mind that there are several different types of consolidation programs available in the market. In order to make an informed decision and to choose the most suitable program for your case, you must have a clear idea about what kind of debt you owe and how much. As a general rule of thumb, the higher the debt balance is, the better a consolidation program is likely to work. However, it does not mean that owing a high amount of payday debt is a good thing. There are several agencies out there that can help you with smaller debt problems as well.

Take Advantage Of Your Good Credit Score And Home Ownership

If you own a home, you should consider consolidating payday loan debt using a secured loan. This way, you can easily qualify for much lower interest rates. However, you must also keep in mind the risks involved with this process. Since it is a secured loan where you have to put your home as collateral, you may end up losing your home if you fail to make the repayment even after your debts are consolidated. Credit score is another crucial factor that plays an important role in determining interest rates. Many people assume that since they owe a high amount of debt in payday loans, it affects their credit score adversely. But, as a matter of fact, interestingly, payday debt usually does not have any negative impact on your credit report. The simple reasoning behind this is that payday lenders are different from traditional lenders and they never report to major credit bureaus. Though they do report your debts to smaller credit bureaus, but your actual FICO score is often based on the reports prepared by the three major credit bureaus. Therefore, you should check your credit score and make sure that all entries mentioned on it are correct and complete. If you have a good credit score, you can qualify for a lower rate even in unsecured consolidation loans.

Make Sure The Agency You Are Signing Up With Legitimate And Reputable

If you are considering consolidating payday loan debt, you have to be very careful while you are looking out for the bets agency. Just like in any other field, there are several unscrupulous and fake agencies that are running their business in the field of payday loan debt consolidation also. Therefore, make sure you do a thorough background check before you sign up with one. You can check their past records by contacting the BBB (Better Business Bureau). Never sign up with an agency that is not listed in BBB.

Negotiation With Creditors

Before starting any negations with your creditors, the agency you sign up with will discuss the various options with you. Depending upon the severity of your payday debt problems, you may have to make a choice between an array of options, such as debt settlement (by part payment), debt management, or debt consolidation. Make sure you thoroughly understand the difference between the different programs for consolidating payday loan debt. Do not leave the decision with the agency itself. You should instead try to understand the process on your own and make an informed decision.

Sign A Contract For The New Repayment Plan

After the negotiations, you will be presented with a new repayment plan and a contract to sign. Make sure you read the terms and conditions of the new plan thoroughly. If you have any queries or confusion, do not hesitate to get things clarified. Sign the contract only when you are sure that you can affordably make the payments as part of the new plan in a timely manner without making any defaults.

Overall, consolidating payday loan debt can be a great way to deal with the nasty problems of payday debt. You just have to follow the procedure with the right approach. At the same time, you must also demonstrate some great financial discipline, as only then these programs can really work for you and help you achieve the kind of financial freedom you are dreaming for.

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