If you’re looking for a payday loan, you may want to consider your repayment term first. Payday loans are generally offered at higher rates than normal, and within a few years, the interest on your loan pile up to a big number. As a result, you might regret loaning money in the first place. If you do not have the means to pay off your short-term money advance, you may want to consider a consolidation loan. With help from a loan consolidation company, you can redefine the repayment terms making it easier to repay your payday loans. However, first, you need to learn more about how consolidating payday loans works.
What is a consolidation loan?
A consolidation loan is a type of personal loan that allows you to repay all of your debts with just one simple monthly payment. A Payday Loan Consolidation Program works by either lumping all of your debts into one big repayment plan or by paying off each debt individually, depending on your financial institution.
With consolidated loans, you only need to focus on one particular credit card payment each month and not even consider other bills such as utility bills, loans, credit cards, or mortgage payments.
Payday loan consolidation vs. Debt consolidation
A consolidation loan is often confused with debt consolidation. Debt consolidation is the act of combining all your debts into one big payment. However, you still need to make monthly payments like your current credit card payments. Debt consolidation includes not only payday loans but also personal loans, credit cards, and other loans and lines of credit that you may be carrying.
On the other hand, a payday loan consolidation works differently from a debt consolidation as it does not lump all debts together but instead pays off each debt for you, depending on your lender’s terms.
Steps to Consolidate Your Payday Loan
If you are thinking of how Payday Loan Consolidation Program works, you should know that it is much like paying off a payday loan. First, locate your consumer finance company and pay off all your debts to them. Then, consider consolidating your payday loans with a debt consolidation company or following the instructions given by your lender.
By combining all your debt into one simple monthly payment, you get to simplify your finances and make repaying easier for you. Here’s how you can consolidate your payday loans:
1. Calculate Your All Payday Loan Balance
To know how much you need to pay off your payday loan, you have to calculate all your loans. That includes everything from your credit card, home equity line, and other loans. When you’re done adding all the numbers together, then this is what you get:
2. Get A Loan Application
The next thing to do is visit a local financial institution like a bank or a credit union and fill out an application for one of their loan products. Many lenders provide both personal loans and payday loan consolidation, so you should ask about their consolidation loan products before asking for the term and rate of the loan you want.
3. Compare Different Consolidation Loan Offers
You will likely receive a handful of different consolidation loan offers when your application is submitted. Check the settlement date and interest rate before making up your mind on your preferred lender. If you want to save money, choose a lender with a longer repayment term but a higher interest rate.
4. Apply for Your Loan and Get Approved
You may or may not be able to receive a consolidation loan from the same lender where you applied for their payday loan. With financing products from different lenders, you are likely to get approved for either both or none of the loans offered at the same time. If you fail to get approved for any loan, consider applying for a different lender offering you a loan.
5. Payoff All Your Loans
After all your payday loan repayments are made, you can now apply for another consolidation loan with your new lender and start paying off your first consolidation loans. This time, all the payments will be sent to your bank account instead of the lender’s accounts. That sure simplifies things!
Make sure you pay off your loans on time or early to avoid penalty charges and late fees. The amount of money you can save from a consolidation loan depends on the interest rates. Therefore, you must choose a lender with the best repayment terms and the least interest to save more money.
Final Words
Now you know how a payday loan consolidation works. By getting rid of all your debts with a single monthly payment, you get to simplify and consolidate finance-related responsibilities. Of course, you might have to wait a while before getting the money you need with this consolidation loan, but the result is worthwhile and beneficial.