Payday lenders target those with poor credit who need cash urgently and are entangled in a vicious cycle of high interest loans that are difficult to pay back https://consolidationnow.com/payday-loan-consolidation/.
The majority (93 percent) of borrowers are unhappy having taken out a payday loan, as per the latest survey conducted by DebtHammer. Only 1percent of respondents claimed their financial situation improved after taking out payday loans, whereas 84% of respondents said they were in worse financial straits after borrowing a payday loan.
Payday loans offer consumers the chance to get tiny, cash-based advances without credit checks. However, the average repayment time is only two weeks which means that 4 in five borrowers to take out another payday loan in order to settle their current credit card, according to the Consumer Financial Protection Bureau (CFPB) said in its report.
It’s possible to come out of payday loan debt , without having to renew your loan or incurring additional charges. Read on to find out how you can break the cycle of borrowing from payday loans like consolidating debt using personal loans. It is possible to compare rates for debt consolidation loans at no cost through Credible without affecting the credit rating of your.
Three ways to get rid of payday loans
The cost of payday loans amounts the annual rate (APR) of almost 400%. In other words, people who continue to roll over payday loans may have to pay four times the amount they borrowed initially in the course of a year.
The payday lenders might have you believe that the option of rolling over you loan will be the sole option to settle your debt, but this is not the scenario. Here are some alternative ways to stop the cycle of payday loans
- Debt consolidation loans
- Extended payment plans
- Credit counseling
1. Debt consolidation loans
Personal loans are lump-sum loan which are used to consolidate higher-interest loans, such as payday loans. They have fixed rates of interest and repayment terms meaning that your monthly installments will remain the same as you pay off your loan.
The loans for debt consolidation are usually secured, meaning that you don’t need to pledge assets as collateral. Because they’re unsecure they let lenders decide the rate of interest and your eligibility according to the credit rating of your score as well as ratio of debt to income.
Affordable borrowers with good credit scores could be eligible to receive a discount interest rate for a personal loan that can be used for debt consolidation. The rates for personal loans are at the all-time lows, according the Federal Reserve, averaging 9.39 percent in the third quarter of 2021.
Certain credit unions also offer small payday loans (PALs) which permit members to take out up to $2,000 at an interest rate limit of 28 percent. However, these loans may be difficult to locate as only a small percentage of credit unions provide PALs.
It is possible to determine whether you are eligible for a loan to consolidate debt using Credible’s soft credit inquirythat won’t alter the credit rating. Make use of the personal loan calculator in order to calculate your monthly payment to determine whether this can assist you in settling your payday credit.
2. Extended payment plans
Extended payment plans (EPP) allows people who take out payday loans repay their debt for a longer period than the usual 2 week repayment term.Many states have payday lenders required to provide EPPs. You’ll need look into the laws of your state to determine whether you’re qualified.
Some payday lenders offer EPPs , regardless of whether they’re required comply with the law. Loans that are part of the Community Financial Services Association of America (CFSA) are legally required to provide EPPs to customers, however other financial institutions might not offer this option.
3. Credit counseling
Non-profit credit counseling companies provide no-cost or low-cost assistance to people who need help in managing their financial debt. One of these services is enrolling payday loan borrowers to the debt management program (DMP).
With a DMP credit counselor will assist you in establishing an income and a repayment schedule for debt. Credit counselors are in a position to assist you in negotiating with payday lenders to secure lower interest rates or to reduce the amount of loan.
You can find a complete list of non-profit credit counselors on the Department of Justice website. If you have any questions about debt relief for payday loans find out how to consolidate debts by speaking with an credit counselor on Credible.knowledgeable loan counselor on Credible.