Payday Loan Consolidation
It is estimated that 55 million Americans don’t have any emergency savings. This means that they often turn to payday loans when it comes to financial emergencies. Payday loans are used by approximately 12 million people. They typically cost $15 per $100 borrowed. A typical loan has an annual percentage rate of 39%.
Why are payday loans expensive?
Another interesting statistic is that 80% of payday loans can be rolled over or renewed in less than two weeks. Most of these loans have a repayment term of two weeks. This means that the loan must be repaid in full within two weeks. If the loan is not paid back, it will be “rolled over”.
New fees are added to the loan, making it exponentially more costly. This creates a vicious cycle of debt that can be very difficult to break. Consumers should consider debt consolidation in order to repay payday loans. There are many options for payday loans that don’t charge outrageous fees if you have a need for a payday advance.
There are many ways to get out of payday loans
In some cases, it can be difficult to make ends meet when you have a financial
emergency such as a late utility bill or car breakdown. While a payday loan
might pay off the car repair or light bill, it doesn’t leave enough money to
buy groceries, gas, rent, and so on. These expenses will keep you behind, and
continue to mount. Here are other options you can consider:
Consolidation of Debt Loan
Consolidating debt is when you borrow a lower rate of interest to consolidate multiple debts
that have higher interest rates. This results in one “consolidated” payment which is easier to manage.
This is usually true for credit card debt. However, the same strategy could also be
used to repay payday loans. Payday loans are expensive and can sometimes be
disguised as fees. Personal loans offer a better option.
A debt consolidation loan will allow you to pay down your debt faster and is cheaper.
So what’s the catch? To qualify for a personal loan, you need decent credit.
You might have to consider other options if your credit score is not good
Plan for Debt Management
Payday loans are not the only type of debt you might have. A debt management plan may be helpful if you have maxed out credit cards. Nonprofit agencies offer these plans. They also provide credit counseling. Counselors will assess your financial situation and make recommendations on how to reduce your debt.
Counselors can help you create a monthly payment that will eliminate your debt if you are
eligible for a debt management program.
Consider programs for Employer-Based Loans
You can also look into your employer for emergency loans. Many new companies have
partnered up with businesses to offer loans through the employee benefits
These loans usually range from a few hundred to a few thousand dollars. You won’t be
disqualified if you have low credit scores. These loans are much more
affordable than payday loans. The loans can be paid directly from your paycheck. This could be good or bad depending on your situation.
Consider Payday Loan Alternatives
Some lending companies also offer alternatives to payday loans. These companies do not have predatory tactics the way payday lenders do. For instance, Earnin allows you to withdraw $100-$500 with no fees or interest. The company generates its income through tips.
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