Posts Tagged ‘payday debt consolidation rules’

Payday Debt Consolidation Rules

There are certain payday debt consolidation rules that you must be well aware of. The basic concept is that all your debts are merged into a single debt account. You are then required to make a single consolidated monthly payment every month. There are basically two ways to consolidate payday debts. You can either do it on your own by borrowing one big loan to pay off all your existing debts or hire a debt consolidation agency to mediate between you and your creditors. When you do it on your own, all your debts are paid off at once and then you end up having just one conventional loan account that allows you to make the repayment in small monthly installments over a certain period of time at a very reasonable rate of interest. But, if you are hiring an agency to work on your behalf, there are certain laws that you must be aware of.

No Upfront Fee

As per the payday debt consolidation rules applicable in the United States of America, it is prohibited for the lenders to charge their fee in advance. Therefore, if a company is asking you to pay their fee upfront, you are advised not to sign up with them. The laws have made it mandatory for all debt consolidation agencies to first fulfill the promises they make to their clients and then charge their fee. Many agencies keep the first payment as their commission, which means no payment is made to your creditors during the first month. If that happens, it will make your situation more problematic, as you will end up having another month of default.

A Written Agreement

Another important thing that you have to keep in mind about payday debt consolidation rules is that the laws require debt consolidation companies to explain all the terms and conditions clearly in a written agreement. There must not be any hidden clause. You are also advised to read these fine prints thoroughly before you sign it. If there are certain terminologies or clause that you are unable to understand, you must get written clarification from the company regarding the same.

Regular monitoring is also a crucial part of the process. Even if all payday debt consolidation rules are being followed thoroughly, you must keep a close eye on the progress on your own. For example, you must do a thorough review of the monthly statements of your debt accounts in order to make sure all payments are being made to your creditors as agreed in a timely manner.

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What are the pros and cons of debt consolidation?