Can payday loans be consolidated?

Payday loans are high-interest, short-term loans meant to be repaid on the next paycheck. However, in practice, borrowers often find themselves taking out multiple loans, rolling them over, and ending up in a situation where their monthly payments only pay the interest.

It’s called the payday loan trap, and it’s a real problem. It’s why the average payday loan borrower takes out $375, and ends up paying an additional $520 in fees.

If you have multiple payday loans and are wondering about consolidating them, you’re on the right track. Here’s everything you need to know about consolidating payday loans.

What is loan consolidation?

Loan consolidation is the practice of taking out one large loan to pay off several smaller loans.

This results in a simpler debt situation, but the main benefit of loan consolidation is more favorable terms. These terms might be some combination lower interest rates, lower monthly payments, or longer loan terms.

Most of the time, it only makes sense to consolidate your loans if you can get a lower interest rate. Debt consolidation companies will often advertise lower monthly payments, but longer loan terms, which can keep you in debt longer and result in much higher interest rate payments.

Often people will use either personal loans, credit card cash advances, or credit card balance transfers to consolidate loans.

Can payday loans be consolidated?

In theory, payday loans can be consolidated just like any other loan. However, the problem lies in borrower creditworthiness.

Most people who fall into payday loan debt have trouble getting any other type of loan. Otherwise they wouldn’t have turned to payday loans in the first place. But, there are exceptions and it’s worth figuring out if one of the following options applies to you. If not, don’t worry – DebtHammer provides payday loan relief regardless of your credit.

Payday Alternative Loans

Payday Alternative Loans (PALs) are short-term loans offered by credit unions as, you guessed it, an alternative to payday loans. But if you already have a payday loan, there’s no reason you can’t use a PAL to pay it off.

The maximum annual percentage interest rate of PALs is 28%, and the loan term is usually 6 months. You can take out up to 3 PALs per year, but cannot have more than one out at the same time. There is a maximum of a $20 application fee. PALs do not require a credit check, but usually you must be part of the credit union for a certain amount of time before you can apply for a PAL.

Personal Loans

Personal loans are installment loans that be taken out from anywhere from 6 months to several years.

Most personal loans are unsecured, which typically require a credit score of at least 600.

There are secured personal loans for those with credit scores under 600. These require some sort of collateral – a car, or home, for example.

Credit Card Balance Transfer / Cash Advance

Credit card interest rates usually fall below 35%, making them far less expensive than payday loans.

If you can qualify for a credit card, you may be able to transfer your payday loan balance onto it. Often credit cards have ‘teaser rates’, meaning you won’t pay any interest for a certain time period. If you can get a 0% introductory rate, that is the best case scenario.

Simply use that card to pay off your payday loan balance, and then make your payments to the credit card issuer.

Home Equity Loans / Lines of Credit

Home equity loans and home equity lines of credit (HELOCs) are two ways to borrow against your home. If you own a home, borrowing against it will result in much lower interest rate than a payday loan.

The difference between a home equity loan and a HELOC is that a home equity loan results in a one-time cash outlay. With a HELOC, you have an amount that you can borrow up to as you please.

Payday Loan Relief Programs that Work

Most people stuck in payday loans can’t qualify for any of the above, and that’s a big problem.

Payday loan debt causes an inordinate amount of stress for borrowers. And that’s why we started DebtHammer.

DebtHammer is what some call a payday loan consolidation program. We don’t provide loans, but we analyze loans and consolidate some of them into one, and offer a flat monthly payment. If you have one or more payday loans, contact us for a consultation and we’ll see if we can help get you out of PDL debt for good.

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