Say Yes to Payday Loan Debt Consolidation


Most people have heard of payday loans; they’ve been around for decades.  Payday loans were created to help consumers meet unexpected expenses, emergency financial situations, and pay bills in between paychecks.  Like a financial hero, payday loans come to the rescue when you need to make a payment on your vehicle, pay utilities bills,  or make car repairs.  In some cases,  consumers prefer getting a payday loan to having to pay late fees, if the payday loan fees are less.  Because payday loans are one of the best options available in times of financial trouble, consumers with recycled payday loans are looking for legitimate payday loan consolidation companies.

Payday loans are a quick solution for fast cash in case of a financial emergency.  However, it’s easy to fall into a vicious cycle when unable to pay off the first loan within two weeks or whenever your next payday is.  The unpaid interest and origination fees of the first loan added to the new loan compound with the principal in a never-ending cycle.  When you fall into this category of debt, it seems impossible to find debt relief.  However, don’t despair, finding the way out is possible.  A payday loan debt consolidation relief program may be the answer.

Payday Loans Affect Your Credit

Payday loans are short-term loans which do not appear on any of the three credit reports.  However, collection agencies can buy these loans if they become delinquent  The collection company that purchases the debt may then report the account to the credit reporting bureaus.  Once it appears on your credit report it will affect your scores.  Another way that payday loans hurt your credit is when payday loan companies file a lawsuit against debtors for unpaid loans.  Your credit score suffers when a judgment is made against you.

Debt consolidation can help you recover from growing payday loan debt. There are two approaches to debt consolidation you should consider before deciding which technique is most favorable to your debt and financial situation.

The Difference between Debt Consolidation and Debt Settlement

The term debt consolidation may refer to at least two different debt relief approaches.  One will affect your credit scores negatively while the other one won’t.

How Debt Consolidation Works

The first approach we’ll discuss is debt consolidation. You can apply for a loan with a consolidation bank.  If granted, the bank will place all debts under one loan at a lower rate over a more extended period.   The monthly payment will be lower as well.  The debts you owed will show as “paid off” in your credit report and this will have a positive effect on your credit score.

This type of loan requires that you have collateral. If you do not have collateral, it is difficult to find a consolidation bank to approve your loan.  One way to go around the collateral is to apply for a credit card and transfer the amounts owed to the new card.  Instead of collateral, in this case, you will need to have a high credit score.  The higher your credit score, the higher the credit limit you can qualify for. The negotiation points during the application process include forgiveness of late payment fees and other fees and a reduction in interest rate.

Also, you should be careful not to default or become delinquent on the payday loans to keep your credit score in good standing if you want to consolidate your payday loans. Once the loans are delinquent, they may be sold to a collection company, and this will most likely hurt your credit scores.

The Debt Settlement Approach

Debt settlement constitutes a different approach with different requisites and consequences.  The amount of money you owe in payday loans may be settled for less than what you owe on the principal, and the fees and interest may be forgiven.  However,  to be able to settle the loan,  you will need to make a cash offer on the dollar.   Another requisite is that the loans must be delinquent.  When loans are delinquent instead of selling the loan to a collection agency the payday lender is usually eager to settle with the debtor first since it is more likely they will get more on the dollar from the debtor than from the collection agency.

The downside to this is that you will need to have enough money to make an offer on the dollar considerably lower than what you owe.  An expert debt settlement advisor is the adequate person to negotiate the settlement due to their skill level and the relationships they have with lenders.  Another negative consequence of this approach is that your credit scores will be negatively affected due to the delinquency of the payday loan debt.

Choosing the Best Debt Consolidation Company

Savvy consumers know to research every debt consolidation company and program they come across in their web searches.   Consolidation companies receive ratings and reviews which you should be aware of before considering an application.  Once you have decided on one of the approaches discussed, whether you are looking to settle or to consolidate, the next step is to understand the program and the negotiation points.  The best debt consolidation companies will take the time to explain and answer all your questions before you commit.

Debt consolidation programs do more than help you achieve payday loan debt consolidation relief; they are instrumental in teaching you sound financial practices to avoid being in the same predicament again.  With financial education, you can use what you learn to budget your life’s events and be able to save for emergencies.

The way you deal with money matters on a daily basis has a profound impact on your future financial wellness.


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Founded in 1994 by the late Pamela Hulse Andrews, Cascade Business News (CBN) became Central Oregon’s premier business publication. •

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