Payday loans can be a useful financial product that can help people to meet their short term financial needs. However, as payday loans have high-interest rates and short redemption periods, many people have difficulty paying off the loans by the due date. When a person is unable to pay off the loan by the due date, he or she will likely have to take out a new payday loan to pay off the old one. This is called rolling over loans. The cycle can quickly repeat leaving the person with multiple payday loans at one time.
One solution to the ongoing cycle of payday loans is to consolidate existing loans. With a payday loan consolidation, a person can combine his or her existing payday loans into one simple repayment plan. In most cases, the consolidation process will allow a person to make payments on the balance of the loan over a period of months….. At a 0% interest rate! A person who chooses to pay off multiple payday loans through the consolidation process will enjoy a number of benefits. Payday Loan Consolidation typically results in interest rates that are lower than a standard payday loan and a longer repayment deadline than a payday loan. This means that a person who consolidates his or her loans will make significantly smaller payments, all of which going to the principal and will have more time to come up with the money to pay off the loan. These factors alone can help a person to escape the payday loan cycle and save a significant amount of money.
In addition to smaller payments, paying less interest and having more time to pay, a person who consolidates payday loans will also enjoy other benefits. By only having one payment, instead of multiple ones, it will be easier to keep track of the loan and the payment dates. This makes it less likely that he or she will make a mistake and end up with additional late charges. Using a loan consolidation plan to pay off payday loans that are past due will also help a person end the endless collection calls and letters, which can help to reduce a person’s stress level. A consolidation plan might also help to bolster a person’s credit rating by eliminating the late payment reports from the payday lender and reporting a person’s on-time payments on the consolidation plan.
With the many benefits of payday loan consolidation, there is no reason for a consumer who is struggling to pay his or her payday loans to not take action to find out whether or not loan consolidation can help them escape the payday loan cycle.