Why You Should Never Borrow Another Payday Loan To Consolidate Pay Day Loan Debts?
Payday loan companies often encourage those of their borrowers who are facing difficulty in paying off the debts to borrow a new cash advance to consolidate pay day loan debts. Even the majority of borrowers feel tempted to accept such offers because it looks like a very easy solution. But, it is very important for you to keep in mind that this type of consolidation plan never works; instead, it pushes you deeper into the quagmire of debts.
The Concept Of Consolidation
The basic concept of consolidation is to manage your debts in such a way that should help you pay off your debts faster. Debt consolidation is not just about converting multiple debt accounts into a single debt account. If you are transferring the debt balances from multiple payday loans to single cash advance account, it does not make much sense unless the new pay day loan account charges very low interest and allows you to pay back in small installments, which is usually not the case.
The Predatory Nature Of Payday Loans
Always remember, cash advance loans are predatory in nature. Therefore, when you consolidate pay day loan debts with another payday loan, it does not make much difference. These small, short-term loans are designed in such a way to attract people with low income and the lenders make most of their money only when the borrower fails to make the repayment because this way they can make a lot of money for a very long period of time while rolling over the loan with every passing month. There have been many cases, where people have already paid over eight times the actual amount of money they had borrowed initially and still owe hundreds of dollars.
Signing Up With A Payday Debt Consolidation Firm
Therefore, if you want to consolidate pay day loan debts, you can consider signing up with a payday debt consolidation firm. A consolidation firm manages your debts on your behalf while guiding you on how to bring your finances back
on track. They first do a thorough review of your monthly income and expenses and figure out your affordability. Then, they negotiate affordable repayment plans with your payday lenders. The attorney appointed by a payday consolidation agency also educates you about the legal rights and options that you have. They will make sure that your rights and interests remain well protected. When a consolidation plan is finalized, a contract is signed by all the three parties – you, your lenders and the consolidation firm you have signed up with. Once you sign the contract, you will be required to pay a certain amount of money every month to the consolidation firm, which will then further transfer the payments to your respective creditors as per the new plans.
Borrowing A Conventional Loan For Payday Debt Consolidation
You will be glad to know that there is also a way to consolidate pay day loan debts by borrowing a conventional loan account. The amount of this new loan account must be big enough to cover all your payday debts. This way, you easily clear the outstanding balance on every cash advance account that is due in your name. Once your payday debts are settled, you will have a single conventional loan account to deal with. The best thing about a conventional loan is that the interest rate is very low as compared to the rates charged by payday loan companies. Besides that, unlike payday cash advances, there are no provisions of rollovers here. It means your actual debt balances does not grow with every passing month. In fact, it reduces significantly every time you make a payment.
Overall, borrowing a payday loan to consolidate pay day loan debts is very much like emptying a bucket and filling it up with a similar thing at the same time. Therefore, if you want to clear your payday debts, you must first stop taking any new payday cash advance. For debt consolidation, you should always consider either borrowing a conventional loan or signing up with a consolidation agency.