Debt Consolidation Help With Payday Loans
Help With Payday Loans
Consider debt consolidation if you are having trouble repaying your payday loan.
Payday loans can be used for small amounts. However, they have short payback periods and high interest rates (the equivalent of triple-digit annual percentage rate), as well as the potential to cause multiple withdrawals from your checking account (which could lead to multiple overdraft fees). This makes them particularly risky for borrowers.
A payday loan requires only one payment. The process takes less than 14 days in most cases. This could lead to higher loan fees and more restrictive repayment arrangements.
A widely cited 2014 study by the federal Consumer Financial Protection Bureau (CFPB) found that 80 percent of borrowers have renewed their payday loans at minimum once. 15 percent of those who are in payment sequences of ten installments or more were not eligible.
Borrowers can choose to renew their loans on the sole basis of interest. Although the payment period is extended by two weeks, the final amount is not affected. Your interest rate will rise if you re-borrow an existing loan. You will have to repay the loan at a higher interest rate and for a larger amount.
It is possible to get a loan to repay your payday loans. This may seem absurd.
Consolidation of Payday Loans
A loan to consolidate payday loans is very similar to a loan to consolidate credit cards debt. You can save money over the long term by borrowing money at lower interest rates and using it for high-interest debt.
Many people who apply for payday loans don’t realize that they won’t pass the credit checks necessary for a traditional loan.
This assumption could be wrong. It doesn’t matter if your credit score isn’t perfect. It is important to examine all credit options. Check your credit score to find out more.
No matter what credit score you have, a payday alternative loan (or PAL) can help you get out of the payday loan trap.
Payday Loans Alternatives (PALs)
Realizing the need for payday loans by borrowers with poor credit histories or low credit scores, many credit unions offer payday alternatives loans. These are short-term loans without interest and can be used to pay off your debts.
These loans can be obtained for small amounts (between $200 to $1,000) and don’t require a credit check. PALs are available to members who have been in the program less than a month. Either pay a $20 application fee, or you can set up direct payments from your paycheck.
Although PALs don’t provide payday loans, they can help you. Personal loan agreements (PALs), which are also known as personal loans, can be used to replace payday loans. A personal loan arrangement (PAL) can replace payday lenders. This allows you to borrow money to pay your monthly bills.
- Payday loans have higher interest rates than personal loans. This is also known as the maximum annual percentage rate (or APR) of 28 percent.
- You can use PALs to repay your debt. These monthly payments can be set up for up to six months. You cannot increase or renew your debt.
- Your credit union might report PAL loan payments (Equifax or TransUnion) to national credit agencies. Your credit union might record your payment if you pay all PAL loan installments in full.
This will improve your credit score if you have bad credit. Credit unions do not require you to report these payments. You can inquire about the payment reporting options offered by banks if you are interested in opening a PAL Loan account.
Credit unions will only allow you to use PALs once per year. You must first pay off all existing debts before you can be eligible for a loan.
Payday loans and credit can do damage to your credit
Payday loans do not help you establish credit. PAL loans may be an alternative. The national credit agencies do not need to report payments. Payday loan lenders can send your debt to collection agencies or take other actions that could damage your credit.
A payday loan does not have the credit-building benefits that a PAL or traditional personal loan does. However, skipping a payday loans payment could have more severe consequences than missing other debt payments.
There are many ways to get payday loans.
Bankruptcy may be an option if you are drowning in payday loan debt, and you can’t or won’t get a Personal Aid Loan.
- A debt management program (DMP) involves working with a federally licensed credit counselor to create a plan for paying back your obligations over time. Counselors can negotiate with creditors, including payday loan lenders, and may be able to obtain partial payments from them. This is not a guarantee.
- Your bankruptcy petition may allow you to have your debts forgiven or placed on a long-term repayment plan. But bankruptcy could have serious consequences for your ability to borrow money in the future. It is possible that you will not be able to rent an apartment or house. You might also have open utility and mobile phone accounts.
DMPs and bankruptcy are both considered terrible calamities. These events can have a lasting effect on your credit score. This may not seem like an important issue if your credit scores have been low.
However, in the five to ten years that DMPs could lower your score or the seven to 10 years that bankruptcy remains on your credit report, you can do a lot to improve your credit score to be eligible for mainstream credit.
If payday loans are not an option, you can opt for personal loans and PALs to meet your borrowing needs.