With Covid-19 on everybody’s neck, most Americans have found themselves at the mercy of payday loans. National Payday Loan Relief says “Payday loans are controversial. As much as they give you a readily available supplement to your paycheck, they are risky and expensive. The risky part is that they can trap you into a never-ending debt cycle”.
Are you drowning in payday loan debts? All is not lost. Debt consolidation can help you out of the deep waters before you drown.
What is debt consolidation?
Debt consolidation entails taking a new loan to offset all your existing loans in a fixed repayment schedule. This process is one of the hassle-free ways to work towards financial freedom, especially if the new loan is cheaper and with lower rates.
It is a no-brainer that making several loan repayments per month can overwhelm you. Sometimes, you may even lose track of some of them and miss the payment. This attracts penalties and hurts your credit score.
To go around the problem of multiple loans, you should consider debt consolidation. You can take a new personal loan from a bank, credit union, or online lender. You can also seek the services of a loan relief and consolidation company, which has specialized expertise in debt consolidation matters.
5 reasons why you should consider debt consolidation to offset payday loan debt
Payday loan consolidation has several benefits, including lower interest rates for the new loan and a simplified payment plan.
Combines all debts into one
It is a no-brainer that paying off several loans at a go can overwhelm you. While meeting deadlines and making sure you send the right amount to each creditor, you may miss some payments. This may lead to harassment from the creditors or a negative credit score.
Debt consolidation rolls all your debts into one. This gives you only one loan to think about. It also gives you only one lender to deal with, and in the case of a consolidator, you even get extra financial counsel.
Lowers your interest rate
Enhances your credit score
Do you know 35 percent of your credit score depends on your loan payment history? Yes, that is true.
With only a single debt to think about, your chances of missing payments reduce significantly. Consistent and timely payments will boost your credit score, making you more likely to get better loan offers when you need them.
Suppose you have a payday, auto, and credit card loan? Consolidating these loans into one pays off all of them so that you are left paying the new loan. This positively impacts your credit score based on your previous loan repayment history.
Reduces your monthly payments
When you consolidate debt, the lender offers new rates, terms of payment, and most likely lower monthly payments. This usually happens when you take a loan that is spread over a more extended period.
For instance, if you had a payday loan that requires repayment every two weeks, taking a loan with two years repayment period may have you paying lower monthly payments. The more extended period gives you time to save some money for other things such as utility bills and personal development.
Keeps of aggressive lenders
Getting calls from different creditors now and then feels like you are being torn apart in all directions. It can also embarrass you among family and friends; some creditors access your contact list and start calling them to remind you of your debt. Quite embarrassing, isn’t it?
Taking a new loan to consolidate all your loans saves you from the harassing phone calls and nagging emails. A consolidator can also take over the responsibility of your payday loans, thus keeping lenders from accessing your bank details.
Debt consolidation is a good way to elevate yourself and get out of payday and other types of loans. You may end up paying lower interest rates, monthly payments, and overall loan amount. Moreover, rolling all old loans into a new and more flexible loan can boost your credit score because you will be concentrating on a single loan.