If you have used payday loans and are finding it difficult to repay them, then a consolidation loan could be a good solution. Many people find themselves in difficulty repaying these loans often because they fail to fully understand just how payday loans work. Failing to repay your loan on time can result in further charges and fees making them very expensive and often leading to deeper debt problems.
Payday loans have proved a very popular choice since the economic crisis hit but critics point to unscrupulous lenders and lack of consumer awareness as leading too many borrowers into an endless cycle of debt. Many consumers, attracted by the ease in which these loans can be obtained, have taken out subsequent loans before repaying their existing ones, whilst others having run into difficulty repaying just one loan, have taken out another to repay the first.
With payday loans lenders attach high fees or interest rates to cover the high risk they take in lending over short terms. Payday loans are secured against your next paycheck and are repayable in full on the agreed date. Although some lenders are offering instalment terms, the charges for these loans are often much higher than for loans repayable in one payment, but repaying in one single payment is usually where most people struggle.
A consolidation loan would effectively wipe out all your loans leaving you with one loan and one repayment. Debt consolidation services are offered by debt management companies who will negotiate with lenders on your behalf to lower interest charges and set out one monthly repayment which you can afford.
Your first step if you fall into difficulty repaying your payday loans is to talk to the lenders and see if you can negotiate new terms with them yourself. If this fails, then a debt counselling service or consolidation company should be your next step. The service should also help you to calculate a budget based on your income and expenditure and help you to reduce your outgoings and ensure you can make all your repayments.
If you are considering payday loans as a means of meeting unexpected expenses do budget carefully and ensure you only borrow an amount you can comfortable afford to repay from your next paycheck. Do a thorough research about the lenders carefully to find the best rates and repayment terms for your needs and if you should fall into difficulty repaying the loan when due, then talk to the lender as soon as possible.