Lenders offer short-term cash loans without the need to pass a credit check. It sounds promising until you realize just how much interest you're paying and by then it's too late. You may decide to consolidate payday loans. The Consumers Union stated that: "The interest rates for such transactions are a staggering: 911% for a one-week loan; 456% for a two-week loan, 212% for a one-month loan."
If you've had to renew the agreement on several occasions, you're probably wondering if there's a better option. How do I find an alternative source of payday debt relief? Far too many people have borrowed money for an urgent need, only to become trapped in a cycle of dependency. Don't despair as there are some perfectly legal ways of ridding yourself of unsecured personal debt.
How Do I Consolidate Payday Loans?
Person-to-person lender – If you've got fair to excellent credit, you may decide to apply for an unsecured loan from a peer-to-peer lender, such as Lending Club or Prosper. Provided that your credit score is at least 640, you can borrow up to $25,000 for consolidating payday loans.
HELOC – Borrowing money with past indiscretions is far more difficult when you've failed to settle your debts punctually during the last 7 years. However, if you're a homeowner with sufficient equity, you may be able to get a flexible HELOC loan secured against your home at a favorable rate of interest.
Family loan – If you've fallen upon hard times, it's worth checking to see if a member of your family is in a position to offer you a payday consolidation loan. When you've got adverse credit, this is likely to be the most affordable way of getting access to the money you urgently need.
Credit card cash advance – If you've got a charge card, you may be able to withdraw a percentage of your credit limit from an ATM. The interest rate will be slightly higher than the advertised rate, but it's still less expensive than a loan renewal from a payday lender.
Can I Get Payday Debt Relief?
Debt management – You have a low credit score and are unable to borrow cash, so it's worth considering a debt management plan. You'll be able to consolidate personal debt from all unsecured sources and make an affordable payment to your creditors each month until all your debt is cleared.
Debt settlement – Regarded as the main alternative to bankruptcy, a debt settlement program involves negotiating with creditors to secure a reduction to the amount you owe. You'll then make a payment to an intermediary, and they'll divide the money on a pro rata basis.
Bankruptcy – Chapter 7 enables you to become debt-free in just 4 months. Following changes to the bankruptcy code in 2005, you must not have taken out a cash advance for more than $750 within 70 days of filing. This is to discourage people from taking out a loan with no intention of ever paying the money back.
Payday Consolidation Loan vs Debt Elimination Plan
If your credit score is over 640, you may decide to consolidate payday loans through a peer-to-peer lender. You can put all of your debts under one roof and pay back the debt at an affordable rate without damaging your credit history. However, if you already have adverse credit, you should talk to a credit counselor as there are several debt solutions that may be more appropriate for your needs.
Sources:
- "Fact sheet on payday cash loans." Consumers Union
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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