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Payday Loan Consolidation Explained

Payday loans usually carry high interest rates that can hit the triple digits. They also have short repayment periods, meaning that whatever cash you borrow must be paid back quite quickly.

What happens when you combine unusually high interest rates with short repayment periods? You have borrowers that cannot repay the loan in time, causing them to roll over the loan for a fee. As you roll over the loan and incur extra fees to delay repayment, you can find yourself in a hole that’s hard to crawl out of. And you could even find yourself owing more cash than you initially borrowed.

How can you manage multiple payday loan payments from a situation like the one described above? By using payday loan consolidation.

With payday loan consolidation, you combine costly, existing payday loans under a single, new personal loan. The personal loan simplifies the payment process, as you only have to worry about paying it off in fixed monthly installments. Best of all, the new personal loan should carry a much lower interest rate than your existing payday loans, making the payoff more manageable.

The Benefits Of Payday Loan Consolidation

Trying to manage one payday loan is stressful enough. But if you have to roll over your loans or manage multiple ones, that may feel nearly impossible to handle. Consolidate your payday loans, and you could enjoy these benefits:

• You can get a personal loan with a lower interest rate than payday loans notorious for their high interest rates.
• You can go from trying to pay off multiple payday loans to just one via the personal loan.
• Personal loans usually have longer repayment periods, giving you more time to reduce the debt via smaller monthly payments.

How To Consolidate Your Payday Loans

The main goal in consolidating payday loans is to get a personal loan that covers them all. As such, you will need to apply for a personal loan through a credit union, bank, or online lender.

If you’re a member of a bank or credit union, try applying for a personal loan through those avenues first. Even if your credit isn’t great, you could get a personal loan for being a longtime customer.

If that’s not an option, several online lenders offer personal loans for multiple purposes, including debt consolidation, such as Upstart, Upgrade, Universal Credit, Seed, OneMain Financial, Avant, LendingPoint, and Oportun. The interest rates on personal loans from such online lenders should max out at 36 percent APR, which is much less than the triple digits you may encounter with payday loans.

To shop around and get the best personal loan for your needs, try to prequalify through each lender. Prequalification involves inputting basic information to see what type of loan you qualify for without having your credit pulled and dropping your score.

Once you pick the best loan for your needs, you can formally apply, have your credit pulled, and hopefully get approved within minutes. Depending on the lender, you could get funds deposited to your bank account the same day. Pay off the payday loan lenders immediately to get rid of those costly loans, start to repay your personal loan, and you should find your financial future to be a lot less stressful.