Paying off payday loan debt consolidation is a challenge, but it's not impossible. Consolidating your debt is a good way to wrap it up into payments with much better interest rates, and there are several ways this can be done. Finding a good loan, strategizing your payment plan, and asking a financial planner for help can help you pay off high-interest debt.
Find the Best Loan for Consolidation
The first step toward consolidating payday loan debt is the see what other options you have available to you. Ideally, you'll be able to pay off that debt with something that has a much lower interest rate. Even if almost anything will be an improvement over the average of 391 percent effective APR on payday loans, it helps to do some digging.
First, look at personal loans from local banks and credit unions. These loans can be broken down into two types: secured and unsecured. The interest rates for unsecured loans are based off factors like your income and credit score, while rates for secured loans tend to be lower, as they involve you putting up something you own as collateral (such as a car).
Second, if you own a home, you may be able to take out a home equity loan. Interest rates for these also tend to be very low as your home is being used as collateral.
Finally, consider loans through peer-to-peer lending sites. These loans don't come from financial institutions, but from groups of individuals. If you aren't able to get a good rate or even approval from banks or credit unions, these may be more accessible.
If money is tight, you may need to stay away from secured loans of any kind, as adding collateral can be a risk. Still, it's worth doing research to see just what you can get.
Take Multiple Steps
Depending on your situation, you may need a plan that involves multiple steps. For example, if you don't qualify for any loans, you can still do something for more immediate relief, even if that option isn't as good as a low-interest loan.
One such option is taking a cash advance from a credit card. Credit cards, and especially cash advances, also have high interest rates, but they're still far better than the interest on payday loans. An important consideration here would be to make sure that you're actually saving money as a result of this; if you do the math and find that between monthly payments and other fees you'd end up paying more per month, avoid this option.
Another option is a Payday Alternative Loan, which is given by some credit unions. These are designed for people with poor or no credit, and interest rates can be higher as a result, but will still be much lower than what you're currently paying. They are also typically given in amounts of $1,000 or lower, so make sure what you can get from a PAL is more than what you owe on your payday loan.
Consult a Financial Planner
It might seem counterintuitive to spend money to help you get rid of debt, but if you're in a tricky long-term situation, a financial planner can offer plenty of help. A financial planner can help you find immediate relief from high-interest debt, then help you developer a long-term plan toward getting you free of debt.
If you're already certain you want to look at consolidating your debt, your planner can help you find the right loans and help you organize your finances and develop a payment plan. This will include not just your payday loans, but any other outstanding debt you may have, such as credit card debt. Finally, they can help you come up with a solid budget and spending plan to help keep you out of debt once you've paid off what you have. Final planning services are well worth the investment, especially when debt is a constant problem.
Share23 June 2020
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