Posts Tagged ‘unsecured Debt Consolidation Of Payday Loans’

Debt Consolidation Of Payday Loans Without Collateral

There are many non-profit and for-profit organizations in the market that offer a wide range of programs for debt consolidation of payday loans. But, in order to participate in those programs, you are generally required to put an asset or property as collateral against the money they are investing in you to help you get out of your debt problems. That is the reason why such debt relief plans are also termed as secured consolidation programs. But, if you do your research thoroughly, you can find many other organizations that offer unsecured programs, where you are never asked for any collateral.

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Alternatively, there are also several DIY (do it yourself) methods for debt consolidation that can help you pay off your payday debts without collateral. Following is a brief rundown on some of the best options in this regard.

Sign Up For A Consolidation Program Instead Of Borrowing A Consolidation Loan

Many people do not understand the difference between a debt consolidation service and a consolidation loan. The collateral requirement is applicable when you are borrowing a debt consolidation loan for payday debts. In this method, the organization agrees to pay off all your payday loans on your behalf provided you agree to repay a bigger amount to them but in easy monthly installments over a certain number of years. But, they agree to do this only if you provide them a security. If you fail to repay the said amount to them as per the agreement, they sell the asset put as collateral to recover their money.

On the other hand, when you do not borrow any such loan, but just sign up for a service for debt consolidation of payday loans, it means the organization will not pay off all your debts

in one go. Instead, they will only work as a mediator between you and your lenders. They also negotiate with your creditors and convince them to waive off certain charges, reduce interest rates and to increase the repayment period without costing extra money. Then an agreement is signed by all the parties, where you agree to make a single consolidated monthly payment to the debt consolidator who then transfers the payments to your respective creditors. As a mediator, they charge a certain amount of money as their fees.

Unsecured Debt Consolidation Of Payday Loans On Your Own

As you can see, it costs additional money to sign up for professional debt consolidation services for payday debts. You can save that money by choosing to consolidate the debts on your own. There are several DIY options that you can try. For example, you can borrow a big unsecured personal loan and then can use the fund thus obtained to pay off your extremely high-rate payday loan debts. It is very much like a debt consolidation service without a mediator. Once all your payday debts are paid off, you will be required to make a single monthly payment toward that personal loan, which will be a very small amount of money as compared to what you were supposed to pay collectively toward the payday loans. Unsecured personal loans charge interest at a comparatively very low rate and they allow you a much longer time to pay back the entire amount, which further reduces the amount of monthly installments. This method can help you rebuild your finances quite affordably without causing much stress.

Dealing With Bad Credit

When you are heavily in debt with payday loans, it also affects your credit ratings quite adversely. With such a bad credit, it will obviously be very difficult for you to qualify for a personal loan. Prime lenders are very much likely to reject your applications straightaway. But, you don’t have to be disappointed, as there are many sub-prime lenders who are more than willing to offer you a personal loan even if your credit score is not at par. They just charge a much higher rate of interest as compared to the rates charged by prime lenders. But, even this higher rate should not turn out to be a bid deal for you because the overall charges and terms will still be significantly very low and more comfortable as compared to payday loans.

Overall, debt consolidation of payday loans without collateral is not an impossible thing. You just have to do your research and calculations properly. Get help from a non-profit credit counselor if you are not sure which option is the most suitable for you.

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What are the pros and cons of debt consolidation?