If you’re feeling trapped in a perpetual cycle of cash-based payday loans then you’re not the only one. Twelve million Americans borrow payday loans every year, according to Pew Charitable Trusts, and the Consumer Financial Protection Bureau (CFPB) estimates over 80% of payday loans are carried over or renewed in two weeks.
Payday lenders earn the majority of their profits from renewal loans.The excessively high rates of interest (averaging around 400 percent) and a lengthy repayment timeframe (your whole balance due in two weeks) are created to keep people stuck in a cycle of debt that is difficult to get out of.For more information on payday loan companies, their repayment plans and how they operate, what benefits they bring, as well as dangers, read our article on Payday Loan Consolidation – BridgePayday.
To stay on top of the pace of repayment, borrowers are often renewing their payday loans several times and incurring more charges than the original loan.Many even take new payday loans in order to pay back a previous loan.
If you’re in a situation similar to this, and your debt is growing insurmountable, you might be thinking about consolidating cash advances. Continue reading to find out more information about it.
What exactly is payday loan consolidation?
Payday loan consolidation occurs when you combine all your payday loans outstanding to make one single loan. The goal of consolidating payday loans is to reduce charges for borrowing and to establish flexible repayment terms in order to repay the loan.
The consolidation of your payday loan can be accomplished by a variety of methods such as using a personal debt consolidation loan, undergoing the debt-management process, or paying off your debts through a debt settlement.
When is the best time to consolidate? When is it not?
Offers of higher rates and a more flexible payment plan could make the idea of consolidating payday loans seem like a no-brainer. However, this isn’t always the most beneficial option.It’s essential to analyze your financial situation and decide whether this is the right choice for you.
It is recommended to consider consolidating your debt if:
It is recommended to consolidate your loans whenYou should consolidate if you’re frequently needing to renew your payday loan or if you’ve got multiple payday loans, and you’re not able to afford the funds to make payments.This is especially true when you’re experiencing financial difficulties, such as the loss of your job or spouse, or a family member.
Another aspect to take into consideration is your overall health. If you’re being bullied by your payday lender for the inability to pay (read our guide on what you can do if cannot pay for your loan) and it’s impacting your wellbeing, then it is something to look into.
Based on the method you choose to consolidate your debts, such as in the event that you go through debt management or debt settlement firm, you’ll probably be denied the ability to open fresh credit cards.It is therefore essential if you decide to opt for this option, to be able to pay the debt, adhere to a budget, and make changes to how you manage your finances.
And lastly, and perhaps most important the most important thing to remember is that you should consolidate when you’ve spent the time to conduct your homework and have identified a consolidation company that you count on. If you’re not vigilant you may be enticed by a scam, or get involved with a debt consolidation firm that does much more damage than it’s worth.
It is not advisable to consolidate the following if:
If you’re generally capable of making your payments without sacrificing your requirements and you have a stable job or are able to boost your income it is probably not a good idea to consolidate.
It is also not advisable to consolidate if you’re not determined to change your spending habits, adhere to a budget, and avoid the creation of new loans.This is especially true in the event that you plan to work with debt management or settlement business.
But most importantly (and we cannot be more clear about this) If you’ve not taken the time to weigh your options and speak to several different companies prior to making a decision, you shouldn’t consolidate.
What should you consider when you’re searching for a debt consolidation plan
If you’re looking for a consolidation company, it’s essential that you make the effort to locate a reputable firm or debt management program you can count on.Here are a few factors to consider when you’re looking for a consolidation partner:
What’s their background?
What is the length of time that this business has been in operation and where is their headquarters?Are they claiming to be a non-profit organization?If yes, be sure you verify the status of their nonprofit.It is also essential to choose companies that are accredited and licensed.It is best to choose a business that has been that is accredited by one of these groups: National Foundation for Credit Counseling, Financial Counseling, Association of America, Council on Accreditation.Also, you’ll need to check the accreditation of the legitimacy of your lender by visiting NMLS Consumer Access. NMLS Access website for consumers. Access website.
What is their location? and how are you in contact with them?
It is crucial to know ahead of time what you are getting from a business in terms of what the first meeting with them will look like, and the type of support you can expect throughout the course of your consolidation plan.It is strongly recommended for instance, that your first meeting be conducted in person rather than on the phone.
Another thing to be asking is what type of support for customers is available when you decide to sign up with a business. What are their hours of support? Do they provide support via the phone or do they contact via chat or email? What is their typical response time?
Are they open about their procedures and the costs they charge?
If you are looking at a company’s website Pay attention to the degree of transparency they provide regarding their charges and procedures. The more details they are willing to disclose upfront the more transparent they are. It is important to leave a site with a thorough knowledge of the procedure you will undergo and the costs you will be assessed.
What do other people have to say about them?
Look up the ratings as well as reviews posted on BBB.It is likely that you won’t come across a company that does not have a problem, however, there are some that have more than others.The degree of responsiveness to complaints from customers and the extent to which they can resolve promptly is also crucial.Reviewing their reviews can assist you in identifying patterns – for instance, the majority of complaints against debt management firms are related to clients still receiving calls from loan lenders since, despite paying monthly to the company that manages debt but the company isn’t paying its creditors on time in their name.It’s like you’re being a good person and another person is making you be in trouble!
Find information and reviews about the company online, wherever you’re able to find them, whether that is Google, Reddit, or the social media profiles of the company.Is their presence present on the social platforms?What kind of posts do their followers post?
It is also possible to contact the company to find out whether they’re willing to connect you with former customers to talk about their experiences with the service.
What do you feel your gut is telling you?
That sensation in your gut is real.Utilize it to your advantage and remember that you’re in charge of your financial situation.If you’re trying to get acquainted with the business, you shouldnot feel like you’re under pressure.Be cautious of companies who make contact with you.It is your duty to be the first one to make contact.Also, be wary about promises that sound promising to be true.These companies may negotiate the fees you pay with payday lenders however, they cannot promise a specific outcome.