A payday loan, also known as a “cash advance” loan, is a loan for a small amount, usually under $500, and is due on your next payday. The cost to receive a payday loan is high, at $10 to $30 for every $100 loaned. The average fee of $15 for a $100 loan works out to a staggering 400 percent. The average credit card annual percentage rate runs between 12 to 30 percent.
Many people resort to a payday loan due to a shortage of cash or an emergency and use their future pay as collateral for the loan. If the borrower is unable to pay the loan back on payday, the payday lender will often allow the loan to rollover by adding additional fees that will often bury the borrower. This vicious cycle can stop through payday loan consolidation that can stop the high interest rates, combine them into one flexible payment--and save your credit.
1. Stop The High Interest Rates
To stop the high interest rates you need to get help through a payday loan consolidation service. There are many companies who can represent you with this service and it's best to research the right one for you. They do charge a monthly fee or charge by a percentage of the debt you owe, but they will work with you to pay off the loan. Their fee will cost you, but it will cost you less than what you would pay to continue taking out more payday loans.
2. One Flexible Payment
A Loan consolidation service will combine your payday loans into one payment for you. They generally set up an account that you deposit money into monthly. They use this money to establish a settlement with the payday loan company. This stops the accruing interest on your payday loans, so you payback less over time.
3. Protect Your Credit
Your credit is vital to your future, and taking control of your payday loans will help to protect it. Your credit rating measures your ability to make necessary purchases in the future such as a car or home. It is also often required when finding a place to rent.
Benefits and Advantages of Loan Consolidation
Loan consolidation will help you get out from under high interest rates the payday loan companies charge. A loan consolidation service will reach an agreement with the payday loan company in the form of a settlement. A loan consolidation service will work with you and find one flexible payment, but they do charge you a fee, either a monthly fee or a percentage of the debt. Your debt will take time to pay off, but in the end you’ll protect your credit and have a better understanding of loan consolidation and the benefits to managing your debt.