Proper consolidation of your taken payday loan, no doubt, is an ideal solution to being debt-stricken and a good way to get out of your payday loan debt burden. Many people, who take pay day loan and can not timely repay it, consider this option now a days. This is mainly a process of consolidation of your several unpaid bills/loans into a single monthly repayment scheme, where the payment is to be made at a lower rate of interest. Negotiation starts for getting a lower interest rate on your debt, and practically you are merging more than one debt to one payable loan .
The types of consolidation
Basically, 2 kinds of payday loan consolidation programs are normally offered. Precisely, those are as following:
1. Consolidation loan: Under this program, the loan consolidator firm you have appointed would offer you a loan for using the amount to clear all your payday loans with the creditors. You can repay more than one payday loans. After you do so, you need to pay off the consolidation loan in individual monthly installments.
2. Payday loan consolidation: Under this program, your payday loan consolidator firm hired by you would negotiate with your payday creditors for reduction of the rate on your loan debt and getting you a lower interest rate. This would be done to lower the amount of payments you owe to an amount within your affordability. The company will then take just that single monthly total repayment from you…..and that’s it, your unpaid debts are paid off now and you are free from payday loan debt!! Normally, the due amounts are reduced in case you missed any payment. This process is just similar to a debt consolidation program.
Comparing the benefits and demerits of both options, in 2nd option, one has to pay much higher interest rate while paying back for the consolidation loan taken from the company. And, as a whole on total amount of payment also you are paying much more due to higher interest. Besides, the payment term is quite long. Therefore, in my opinion, a payday loan consolidation program is a much better option compared to consolidation loan.
Advantages of loan consolidation-the 2nd option
1. Affordable monthly payments….payment within one’s capacity.
2. Easy process of paying off the debt with different lenders just at one shot…..no need to manage different creditors and different payments.
3. Reduced interest rates.
4. Just a payment each month…the amount is fixed, too. Therefore, planning the total monthly expenditure on different items and budgeting becomes simpler.
5. No late fees or over limit charges.
6. You can avoid creditor or collection calls.
7. Proper payment of your debts, definitely throws a positive impact on your credit report and credit profile.