Posts Tagged ‘Payday Debt Consolidation Rate’

How To Review Payday Debt Consolidation Rates?

When it comes to reviewing payday debt consolidation rates, there are several factors that you must take into your careful consideration. A company that claims to bring down your monthly debt payments to a very low amount of money may not necessarily be the right choice for you. Lowering down your monthly payments often means having a much longer repayment period, which is neither safe nor cheap. A consolidation plan with a very long repayment period is not

a safe solution because it may put you into a much deeper debt problem if things go wrong. Therefore, you are advised to look into each and every aspect thoroughly while you are reviewing debt consolidation rates for payday loans.

Is It A Consolidation Plan Or A Consolidation Loan?

The first thing that is very important for you to understand is that a consolidation loan and a consolidation plan are two different things. Therefore, before you make any decision about the rates, you must make sure whether the debt relief in question is offering you a new consolidation loan or just a consolidated payment plan.

Consolidation Plan

If it is a new consolidated payment plan, it means your payday lenders are also participating in this program. A written contract is signed by you, your lenders and the consolidation company. As per this agreement, your lender may agree to write off a certain percentage of your current outstanding debt balance and allow you to pay back the remaining balance amount in easy monthly installments. Besides that, in such agreements, the consolidation company agrees to work as a mediator between you and your creditors. You no longer have to deal with your creditors on your own. The consolidation company represents you and they do all the dealings on your behalf. You pay an affordable consolidated monthly payment to them while it is their responsibility to make sure that all your creditors get their respective payments in time as per the agreement. In this type of consolidation plan, the rates obviously matter a lot. You are advised to get quotes from at least three to four companies and then compare the rates thoroughly.

A New Consolidation Loan

In many cases, a consolidation company may simply offer you a new conventional loan at a comparatively much lower rate and also allow you to pay back this new loan as per a very easy and affordable monthly installment plan over a certain number of months or years. In general, it is a secured loan and you are required to put an asset or property (such as, your home or car) as collateral against the money you borrow. Once you borrow this new loan, you can pay off all your payday debts in one go. The consolidation company you are working with may also negotiate with your lenders and convince them to accept a reduced amount of payment as a full and final settlement of the entire debt that you owe to them.

This can also be a good solution to get rid of your payday debt problems, but you must review the rates in this case also. For example, you must contact conventional lenders, such as banks and credit unions on your own and find out if you can qualify for a secured loan at better rates for a shorter period of time with smaller monthly payments. But again, when you get a new loan from a conventional lender, they won’t negotiate with your payday creditors, which can be a big drawback.

Therefore, look into all the aspects and do a thorough calculation accordingly before you reach a final decision regarding the same.

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What are the pros and cons of debt consolidation?