Payday loans are a tool that is at once incredibly helpful and a bit difficult for many to use efficiently. Though these quick loans can help stretch a paycheck and really make a difference each month they can also dig a hole that is impossible to climb out of. Though these loans can be incredibly helpful without the right information they can also be incredibly hard to repay hard to use and can potentially ruin credit scores that were good or acceptable before the loan was taken out.
When it comes to payday debt consolidation there are a few different things to keep in mind to help make the process as easy as possible. In general taking out one payday loan ever so often is not going to ruin anyone’s credit score the trouble starts when more than one loan is taken out each pay period and the amount that you owe begins to far exceed the amount that you take in each month. Most of these payday loan companies offer deals for new customers that claim if you borrow $200 you only pay back $203 or some such other low interest rate. This is all well and good for the first loan. Those subsequent loans generally end up costing far more than the first one taken out which is what draws many people into the downward spiral.
A loan that was incredibly reasonable to start out with may have a 17% interest rate the second time you take it out which can quickly and easily ruin anyone’s credit. These loans can be helpful the first few times you use them if and when they are paid back in a timely manner. These loans can help to make any paycheck last longer and can help you get vital money to keep the rent paid groceries bought and more. However it is important that with these loans you know how much you can safely borrow and when to stop borrowing.
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Most of the companies that offer payday loans will allow users to take out several loans at once before they are denied so that in essence the company is getting your paycheck each pay period as opposed to you getting your check. In most cases these fees can end up costing a boatload if borrowers do not know how to effectively stop borrowing and start saving money to pay off these high interest loans. In most cases those that get into trouble with payday loans can seek financial counseling and can get a lower interest rate on a lender regulated loan to help get rid of payday loan debt that may have been accumulated.
These consolidation loans are very similar to other consolidation loans for things like credit cards in that they buy out the remaining balance of your credit line from the service in question and you pay your monthly payments to them rather than to the establishment from which the original loan was taken. This is incredibly helpful as the interest rates on these loans are much more manageable than the rates at payday loan stores.