Payday loan consolidation: How to get out of debt from payday loans

Have you taken out payday loans and now thinking how to get out of payday loan debt? If yes, then you can consider payday loan debt consolidation.

What is payday loan consolidation?

It is a way to manage your multiple payday loans (PDLs) and repay them with just a single payment every month.

How payday loan consolidation can help you out

  • Get rid of loan trap
  • Lower interest rates on your debt
  • Late fees and over-limit charges reduced/waived off
  • Single monthly payment
  • Budgeting becomes easier
  • Do not have to manage individual creditors
  • Avoid harassing creditor/collection phone calls
For more details, check out the 8 benefits of debt consolidation.

How much
debt consolidation
can save you

3 steps to get payday loan help

1 Get Free counseling:

Call 800-DEBT-913 and get FREE advice on how and why to consolidate bad debt payday loans. Explain how much you owe on your PDLs and the interest rates lenders are charging.

2 Ask questions:

Shoot questions regarding payday loan debt assistance to the financial counselor. Ask how much you have to pay for the fees and when you can expect to get out of this debt problem.

3 Consolidate payday loans:

Once you get the answers to your questions, start arranging funds to consolidate payday loans fast. Make monthly payments and follow the payday loan consolidation plan properly.

How to know whether or not your payday loan is legal

Payday loan laws are not universal in every state. Here are certain laws based on which you can determine whether or not your payday loan is legal.

State legal status:

This determines whether or not a payday loan is legal in your state.

Loan specifications:

There are certain laws regarding the maximum amount, loan term, etc. which need to be followed.

Interest rate cap on small loans:

In some states, there is a limit on the interest rate; lenders cannot charge more than that amount.

Debt limits:

Even if a payday loan is legal in your state, there might be limitations on the number of loans you can take out at a time.

Limits on the collection:

You should know the amount of collection fees and whether or not criminal action is prohibited.

File your complaint and get information:

There is some regulatory board in every state where you can contact about any problem

Can you repay pdls with other loans or credit cards?

Yes, you can take out a personal loan with a relatively low interest rate to repay your existing pdls and other unsecured debts.

How does payday loan debt consolidation affect credit?

When you opt for payday loan consolidation help, there is a possibility of a positive impact on your credit. This is because payday debt consolidation methods help you pay off your debts in full, and “Paid in Full” statuses are updated in your credit reports. These affect your credit report and credit score positively.

Don’t panic if you have bad credit. Actually, when you default on your payments, be it a credit card or payday loans, your credit score may drop. Online payday loan consolidation companies know this fact very well and provide extra help to borrowers to get out of this mess.

Is it better than payday loan debt settlement?

If you can repay the outstanding balance in full, then it is better to opt for consolidation since it can help you increase your score. Whereas, your credit score may drop a bit if you opt for payday loan settlement since you’re not paying off your debts in full.

How do you get out of payday loan debt?

How to consolidate legal payday loan debt

Payday loan consolidation program:

This program rescues you from the vicious cycle of debt. It offers you payday loan help through debt consolidation in a short span of time with lower interest rates and monthly payments.

Tip: It is advisable to go for the best payday loan consolidation program with no upfront fees since this is against the law.

Know more…

Payday loan consolidation loans:

These are low-interest loans that help you pay off multiple high-interest PDLs and rest in peace. You need to make only one payment every month to pay off debt gradually.

Tip: It is best to check out the interest rates and repayment terms on these loans so that you don't end up paying more.

Other ways to get out of payday loan debt

Debt management plan

This option gives you relief by reducing the interest rates on your bad debt payday loans.

Know more...

Debt settlement program

This option gives you payday loan relief by paying less than the outstanding amount.

Know more...

Bankruptcy

Here, the court offers payday loan help by liquidating assets. It can be the best way to get out of payday loan debt when you’re struggling to get rid of payday loans.

CFPB trying to bring new rules to save borrowers

In March 2015, the Consumer Financial Protection Bureau (CFPB) declared that it would like to implement new rules to save borrowers from the abusive tactics of the predatory lenders. The proposed rules would make it necessary for the PDL lenders to determine if a potential borrower can pay off the loan in the future including principal amount, fees, interests, etc. The lenders have to check borrower’s income, borrowing history and financial liabilities before offering a loan. The rules would also impose a 60-day cooling off period between loans.

Read more - CFPB Considers Proposal to End Payday Debt Traps

CFPB has not yet been successful in implementing these rules amidst oppositions from certain sections of the political parties. Richard Cordray, the head of the agency commented,

These common-sense protections are aimed at ensuring that consumers have access to credit that helps, not harms them.

So why are some political leaders are not backing these new rules? Well, Sean Barlett (the spokesman of Wasserman Schultz) replied,

The legislation is about preserving the shared goal of implementing strong consumer protections while also preserving access to affordable lending for low-income communities.

If you're unable to meet payments on your payday loans, you may consolidate them and replace multiple bills with a single payment each month. This will help pay off debts faster without having to write several checks a month.

If you want to know how to consolidate and pay off outstanding payday loans, then check out the topics below:

How do you consolidate payday loans?

Debt consolidation is applicable mostly to internet pdls. Here's a step-by-step approach on how to consolidate payday loans held by your creditors.


Calculate the debt amount
Find out the outstanding balance on your PDLs and other unsecured debts (if any) using the Unsecured Loan Calculator.
Contact consolidation company
Approach an online payday loan consolidation company which can help you consolidate payday loans. The best payday loan consolidation company will offer you a free debt counseling session where you can talk to a debt counselor about your financial problems. The counselor will analyze your current financial situation and suggest whether you should go for debt consolidation program or debt settlement.
Now, how does payday loan consolidation work when you enroll in a consolidation program?
Negotiate to reduce rates
The debt consolidation company will negotiate with your creditors to obtain lower interest rates on your PDLs. This is to make sure that you can pay off the principal loan along with interest at reduced interest rates. Moreover, there are chances that your late payment fees can be cut down or eliminated.
Decide monthly amount
The company will help you decide the maximum monthly payment you can afford on your loans.
New payment plan
The consolidation company will negotiate an alternative repayment plan with your payday lenders. The purpose is to work out a suitable plan so that you can continue making payments and get out of debt in a short time.

Should you consolidate payday loans sent to collections?

If your internet payday loans are sent for collections and the collection agency (CA) calls you for repayment, here's what you should do:

Verify the SOL

Check out the Statute of Limitations on the debt.

Request for debt validation

If the SOL hasn't expired, chances are that the CA may win a judgment against you and garnish your wages. So, ask the collection agency to validate your debt. Send them a debt validation letter.

Consolidate and pay off debt

Once the debt is validated, try to consolidate the payday loans to get out of debt faster. Repeat steps 1 to 4 as given above. Here the negotiation should be done with the collection agency and not the original creditor as because he doesn't hold the debt any longer.

Once the SOL expires, the collection agency cannot win a judgment against you even if you do not repay the outstanding debt.
But, this doesn't mean you don't owe the debt. The collection agency may try out means to collect it from you. In such a situation, you may send them a cease and desist letter asking them to stop any communication with you. Or else, you may pay off (consolidate payday loans or settle the debt) the unpaid debt and release your obligation. However, the SOL is restarted once you start making payments.

Is payday loan consolidation legit?

Yes, only if you take help of reliable and legitimate payday loan consolidation companies.

Do payday loans affect your credit score?

Usually, no. The only way a payday loan (pdl) can affect your credit score is when the lenders report it to the three major credit bureaus (Experian, Equifax, or TransUnion). But, usually the lenders report it to Teletrack, which is only used by the payday loan lenders.

Teletrack is a database used by the subprime lenders and payday loan companies. The lenders report your payment performance to Teletrack. So, if you default on a payday loan, it may be difficult for you to take out another pdl. It’s not a bad thing though, especially, if you’re trying to get out of payday loan debt. Teletrack doesn’t show up on your credit report and it doesn’t affect anything else.

However, it is a database that can be used by banks to report:

  • If you’ve had any NSF checks unpaid on your account
  • Your account was closed with a negative balance
  • You had fraudulent activity on your account

These things can make it difficult for you to open a checking account at any other bank.

You should know that a pdl can show up on your credit report if it’s unpaid and the lender sends it to a collection agency. Even then, it has to be a legal payday loan. Be careful while taking out a pdl from a storefront lender as most of them have a legal business. But, many online lenders are doing illegal business in different states.

In case of an illegal pdl, you just have to pay the principal amount. However, you may face legal trouble if it’s a legal pdl and you don’t repay the outstanding balance. So, check the status of your pdls and take necessary steps accordingly.

How can you stop a lender from withdrawing amount for your PDL?

If you have allowed your PDL lender to withdraw money from your bank account, but want to stop it now, you can do it. To do so, you have to revoke your ACH Authorization.

  • At first, inform the company and write to them that you want to revoke the ACH Authorization.
  • Then, write to your bank to revoke the authorization. Most of them have an online form to fill up.
  • To be on the safer side, inform your bank to stop any automatic payment by opting for “Stop Payment Order”
As per the federal law, you can dispute any unauthorized transfer from your bank account to any other account.
However, you should know that even if you revoke automatic payment of a PDL, you still owe the unpaid balance on the loan and need to find a solution to get out of payday loan debt.

Can you go to jail for an unpaid PDL?

No, your PDL lender can’t send you to jail for not paying back your payday loan debts. But, a legal lender can take you to court by filing a case against you if you’re not able to repay the loan. If the lender wins the case and gets a judgment against you, then your wages can be garnished. However, Federal law limits that not more than 25% of your wages can be garnished. The value is decided on the basis of the borrower’s disposable income, the amount left after mandatory deductions, or “the amount by which your weekly wages exceed thirty times the minimum wage”, whichever amount is lower. And, anytime, you can take out a loan to pay off payday loan debt and stop wage garnishment. Read more: What to do when illegal payday loan lenders trap you

Are all payday loans legal? Can you consolidate illegal payday loans?

No, all payday loans are not legal. You can take help of a consolidation company to repay the principal amount of the illegal payday loan. It is because, in case of an illegal payday loan, you just have to repay the principal amount.

How long can a lender collect on a debt?

The Statute of Limitations (SOL) on payday loan laws are governed by the state. It denotes the time within which a payday loan lender can sue a person in the court. In most of the states, the SOL period is between 4-6 years after the last payment is made on the account.
Be clear of debt myths to handle your debts in a better way.

Are payday loan debt consolidation good?

Opting for it is good if you are able to make the agreed upon monthly payments on time. It will help you repay your debts in full at a reduced rate of interest within a definite time period.

Are payday loan relief programs scams?

It depends on whether or not you seek help from a reliable consolidation company.

How can you choose good payday loan debt consolidation companies?

Here’s a checklist on how to choose a good pdl consolidation company:

  • Ask recommendations from friends and relatives
  • Ask whatever you want to know
  • It has a good rating in BBB (Better Business Bureau)
  • It doesn’t charge anything before providing service
You can be assured about good pdl consolidation companies if it has satisfied clients and is into business for about 3-5 years.

Will the pdl lenders stop calling me?

The PDL lenders will most likely stop calling you if they are assured that you will make the required payments and they receive one or two monthly installments.

Are loans available for consolidation?

There are lenders who offer debt consolidation loan to help you consolidate payday loans. But whether or not you can use it depends upon the payday loan balance you owe. Say if your debt amount is around $2500, you won't get a consolidation loan. Such loans are usually applicable to the higher amount of outstanding debt.

When should you go for an Extended Payment Plan?

If you've been dealing with storefront payday loans, there's the option to get an installment repayment plan or Extended Payment Plan (EPP) from the lender as per payday loan laws.

However, the repayment plan applies only to 8 states such as Alaska, Alabama, Florida, Illinois, Michigan, Nevada, Oklahoma, and Washington. The plan is offered by lenders when an account reaches the maximum number of rollovers allowed by the law and the debtor declares that he's unable to continue with the payments.

In states, where the EPP does not apply to storefront payday advances, you can either consolidate payday loans or follow the steps to do it yourself debt management depending upon which is easier for you.

Can unpaid payday loans affect your credit report and score?

When you don’t repay your legal PDLs, the lenders can sell them to debt collectors. Most of the debt collectors report the unpaid loan to the national credit bureaus, which can blemish your credit report and hurt your score.

Is payday loan consolidation safe?

It is safe if you take the help of a reliable consolidation company. In most cases, the lenders will agree if a consolidation company negotiates with them. When you approach a consolidation company for help with payday loan debt and enroll in a program, the debt counselor negotiates with the lenders to reduce the interest rates so that it becomes easier for you to repay the payday loan.

And, if you take out a consolidation loan, then you can repay the PDLs instantly.
You need to find out the best way to get out of payday loan debt.

Can you opt for payday loan debt relief with other loans or credit cards?

Yes, you can take out a personal loan with a relatively low-interest rate for the purpose of debt consolidation for payday loans along with other unsecured debts. You can also enroll in a payday loan debt consolidation program to repay debt with complete professional help.

Real life scenarios

I am applying for a Zoca Loan and I am requesting a loan for $1000 but in the fine print it says I’ll owe about $157.78 for about 28 weeks, which would make me paying back $4,416.68. Will I be responsible to pay back only the $1000 or have to pay the additional $3,416.68?

Solution: Zoca Loans is a tribal loan. So, you need to pay just the principal amount. So, don’t have to pay a penny extra. If they ask you to pay interest on the loan, make a complaint against them to your State’s Attorney General.

Not only Zoca Loans, many tribal and payday loan lenders set up similar terms and conditions while providing such short term loans. That is illegal.

It is also prohibited in some places like Colorado.

So, if you’ve taken out such a loan, they can’t do anything if you don’t repay even the principal amount. But, morally, pay only the principal amount.

I have 2 loans with Speedy Cash, and after my payments this week, I am realizing how stupid I was and have gotten myself in over my head in taking out 2 loans. I can not afford to keep making these payments every 2 weeks and was wondering if a payday loan consolidation is the best way to go. Or will they work with me in smaller payments? I'm embarrassed that I let myself do this and just need to know what to do to keep them from drafting my account every two weeks. What I'm most worried about is getting arrested or going to jail if I default on the loans. Speedycash is legal in my state.

Solution: Yes, if you think it’s legal in your state, and you can repay the loans in full, you can opt for consolidation. A consolidation company can negotiate with your lenders to reduce the interest rate and reach an agreement. Meanwhile, you’ll make an agreed upon payment to the consolidation company and they’ll disburse the payments on your behalf. You can also include other unsecured loans into the consolidation program as well.

I had a loan with Bridge Lending Solutions. I came to know that they are illegal lenders. I have written to them stating that I had paid the principal amount and requested a “Paid in Full” letter. This is what they have said, what should I do? Once a Forum member sent a reply from a pdl lender: “Please keep in mind that Bridge Lending Solutions is a properly licensed tribal lending entity wholly owned by the Lac Du Flambeau, Wisconsin, a sovereign nation located within the United State of America, operating within the Tribe’s Reservation and governed by the Tribe’s Regulatory Authority. As stated in your loan agreement, upon your signature and acceptance of the Loan Agreement, you entered into a Loan Agreement with a Federally Recognized American Indian Tribe and as such, the laws of the state where you reside are not applicable to this loan agreement. Bridge Lending Solutions, is a legal tribal lending entity offering installment loans to consumers and is not violating tribal or applicable federal laws. Therefore, you are obligated to perform to the terms you agreed to under the loan agreement. Please refer to the Governing Law and special note portion of your contract for detailed information. Feel free to contact me should you have any questions…”

Solution:This is a normal response from such a lender. It is not surprising. Don't worry. Stick to your point. Send them another letter with a RRR and ask them to give you a refund. Keep all these documents for future reference if required.

Regarding “Please keep in mind that your online signature is fully enforceable in accordance with the terms outlined in your installment loan agreement.” - Nothing is enforceable because they are illegal lenders.

It is the intention of Bridge lending Solutions to resolve this financial matter prior to it being sent to a 3rd party collection agency.

This was possible if they were a licensed lender in your state. Send them a letter stating that you'll take the matter to the State Attorney General if they threaten you like this. You only owe the principal amount. That's it. If they again contact you for the money, then make a complaint against them to your State's Attorney general.

Last Updated on: Tue, 6 Oct 2020