How to consolidate payday loans and get out of debt

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 payday loans (pdls). Here's a step-by-step approach on how to consolidate payday loans held by your creditors.

Calculate debt amount
Find out the outstanding balance on your payday loans and other unsecured debts (if any) using the Unsecured Loan Calculator.
Contact consolidation company
Approach a debt consolidation company which can help you consolidate payday loans. The 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, 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 payday loans. 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 payday 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.

How do you benefit if you consolidate payday loans?

When you consolidate payday loans, you get benefits as in a debt consolidation program.

  • Lower interest payments
  • reduced late fees
  • fewer payments instead of multiple bills
For more details, check out the 8 benefits of debt consolidation.

Are payday loan consolidation companies legit?

Yes, only if you take help of a valid and reliable consolidation company.

Are payday loan consolidations good?

Opting for payday loan consolidation 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 consolidation scams?

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

How to 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 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 payday loan 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 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.

Last Updated on: Mon, 9 Apr 2018