Payday loans/salary-day loans are common cash assistance that an individual moves to on encountering any sudden expense before salary day. The credit and income affordability flexibility it offers makes it the go-to solution for any uncalled expense.
These are short-term emergency finance solutions that host competitive interest rates. However, lenders providing these loans are regulated and ensure the borrower’s loan affordability. Still, if the borrower skips 2-3 payments and cannot pay it within the time, the outstanding balance multiplies sharply, leading to default or late fees.
Thus, borrowers can resort to payday loan debt consolidation to prevent credit scores from suffering harsh damage.
What is Payday loan Debt consolidation?
A payday loan debt consolidation is a flexibility to optimise the credit score by consolidating or merging all pending payday loans into a single payment. By merging multiple payday loans, you can lower the interest rates and repayments along with the hassle of dealing with multiple lenders. Under this, a borrower may apply for the amount he needs to pay off his dues.
By upkeeping with the repayments, the person may also boost their credit score. If you cannot pay th loan within the term, the lender may stay within the loan term as per your credit and financial circumstances. If this happens, you may be in for a fee. And it implies another payday loan. Debt consolidation is a solution to end this cycle of debt. You need not worry as it grants you a long time to clear your debts in fixed installments.
You may have bad credit if you have too many payday loans in your credit profile. Consolidating on bad credit is possible but may be slightly costlier than on good credit score. You can eliminate higher interest rates by borrowing less than you need.
Is Payday loans debt consolidation better than Debt settlement?
Both terms differ largely.
Payday loans consolidation imply, “your other loans will be paid as per the norms, and now you have a single loan to tackle.
Debt settlement implies “paying less than the total amount you owe.”
If you need clarification on the two broad terms, go for Payday loan debt consolidation. Debt settlement companies tend to work on your behalf and talk it out with your lenders. It is a long process and may cost you good.
And above all, there is no guarantee that you will get the expected result out of the same, which can impact your credit score. Creditors may refuse to negotiate on your behalf in the mid of the agreement. The fees charged by the debt settlement firm could add up to the outstanding debt, leaving you with more liabilities.
Opposed to this, Payday loan debt consolidation grants you complete charge of the payments without any external influence and delay. It eliminates every risk like debt settlement may have.
Does Payday loan debt consolidation impact the credit score negatively?
Payday loan debt consolidation has the potential to either hurt or improves your credit score. On qualifying for it, you may encounter a slight dip in the credit score owing to the credit checks involved. The added loan to an already low credit profile may initially ding the credit report and score.
However, if you consistently maintain the loan payments, you may witness a huge spark in the same. Keeping outstanding balance low on other accounts, avoiding unnecessary payday or other loan applications, limiting the usage of credit cards, and confirming your name on the electoral roll can help you rise over the credit ladder.
Precisely, it entirely depends on your financial behaviour and disciplined view toward eliminating debts from your profile.
When is it apt to consolidate payday loans?
Payday debt consolidation is good only when it saves you more interest and repayments. If it increases the liability, it may not be a good fetch.
For example, if you have other high-interest loans like – student loans, mortgages, home improvement, car finance, etc., you may wish to release some money clocked in your credit report. Nothing could be best than consolidating 10-15 payday loans impacting your credit profile.
Consolidating payday loans with Northern Ireland direct lenders can help you get the extra cash you can use to meet other liabilities and home expenses.
For example- If you took out payday loans of amounts- €100, €200, or €300, you could end up paying €700 plus the interest rate costs, totalling the sum to €741 separately.
By consolidating debts, you will have to pay only €533. The difference is vast, as you can see the profit of €200 here.
It is just an example; you can save more if your credit profile reveals great flexibility for Payday loan debt consolidation.
Bottom line
Payday loan debt consolidation is a suitable way to optimise the existing debts in your report and make room for other life goal accomplishments. It could be anything from buying a car to home renovation. Always ensure that the agreement must not impact the budget’s bottom line.
