These are short-term loans where you receive a small amount of money, with the agreement that you will pay it back, plus additional interest and other fees, on your next payday. These loans are a fast and easy way to get cash, but they can quickly pull you into a cycle of debt
Requirements for payday loan applications:
- In-store applicants are needed to have a personal check
- Government-issued passport, drivers license, or ID
- Email address for online correspondence
- A bank account in good standing
- Valid social Security Number
- Proof of income
Why Are Payday Loans Bad?
One of the major disadvantages of these loans is that they have very short repayment periods yet high-interest rates.
If you are unable to repay your loan within the due date, which is by your next payday, these payday loan companies will encourage you to roll over the loan into a new one that comes with even higher interest rates and more fees.
With each rollover, the interest rates increase, quickly growing into huge debts.
On top of all that, if you default on a payday loan, you risk your debt being sent to collections which hurts your credit score and makes it very difficult to get loans in the future.
Payday Loan Debt Consolidation Pros and Cons
Payday loan debt consolidation aims at providing relief for high-interest loans. These are paid with a single loan at a much lower interest rate.
Pros
- Once it is paid off, it cannot be renewed unless you reapply for a new loan
- Borrowers only make single monthly repayments to the consolidation companies
- Personal loans have a much longer repayment period
- Lower interest rates (5%-36%)
Cons
- If you take out a secured debt collection plan, you risk your assets
- They often lead to ‘insufficient fund fees’ in your account
- You will have to avoid future payday loans
- You are tied to the debt consolidators rules
- Longer repayment terms on the loan
How to Get Out of Payday Loans
There is no magical way to make loans disappear, but there are a few tricks and techniques one can use to manage their debts. Consider some of these options for managing payday loans;
- Working With a Debt Consolidation Company: This entails working with a reliable debt relief company that will help you consolidate your payday loans. They set up an account for you where you are required to make monthly deposits.
The debt negotiation specialists reach out to your lenders and negotiate new payment plans and legal settlements on your behalf which are usually lower than the initial amount you owed. When there is enough money saved up in your account, you can offset the loans. It is crucial to look for a consolidation company that has been accredited by the Better Business Bureau (BBB)
- Debt Consolidation Through a Personal Loan: This is a strategy that requires you to take out a personal loan to settle your payday loans If you have several unpaid debts, you can use one personal loan to cover them all. This helps to get your payments in one monthly payment. A personal loan has lower interests than a payday loan and is stretched over a long period so that you do not have to worry about rollovers.
Is Payday Debt Consolidation Right For You?
Consolidating your loans is one way of settling your debts but it all depends on the unique situation that you are in. Debt consolidation does not work for everyone. If any of these apply to your situation, you may want to consider loan consolidation;
- You are trapped in a payday loan cycle and want out
- You are considering bankruptcy as a way of getting out of debt
- You are not sure you will ever be in a position to pay off the total amount you owe.
Payday Loan Help With Encompass Recovery
Encompass Recovery Group is your go-to debt relief company. We pride ourselves on years of serving thousands of clients and providing solutions for their debt and loan problems.
We review your financial situation and give you the best solutions towards easier debt payments and the ultimate goal of being debt-free.
If you are struggling with paying off your payday loan, or you are stuck in a series of too many roll-overs, call us for help and we will devise the best and most comfortable way to pay off your loans.