Payday loans are really helpful when you need emergency cash and cannot wait for your next paycheck. However, they are comparatively expensive. Not only there are certain fees and charges associated with it, but also the interest rates on these loans are quite high. Therefore, you should always repay your payday loans with your next paycheck to prevent accumulating high interest debts. However, if you have multiple payday loans to repay, then payday loan consolidation can help you to do so.
Here are 4 ways by which you can consolidate and repay your multiple payday loans.
1. By taking out a consolidation loan
There are several financial institutions that offer personal/consolidation loans and you should shop around to take out such a loan with favorable terms and conditions. However, make sure you obtain a loan amount with which you can repay all your payday loans. Thus, you actually consolidate your multiple payments into a single one every month. Moreover, the interest rate on a consolidation loan is comparatively low in comparison to your high interest payday loans.
2. With the help of a consolidation program
You can enroll yourself in a payday loan consolidation program if you want to take professional help in order to repay your high interest payday loans. When you go for such a program, a debt consultant (on behalf of the consolidation company) will assess your financial condition and how much you owe to your creditors. Then, with your creditors' approval, he/she will decide upon a monthly payment with the help of which you can repay your high interest payday loans. However, it is advisable that you inquire how much you need to pay for the professional service.
3. Borrowing money from friends and relatives
Apart from taking out a loan from any financial institution, you can borrow the required amount from your friends and family members. They may be little flexible with the repayment methods. However, it is advisable that you have a promissory note outlining the terms and conditions of the loan. It is quite essential for both the parties to follow the terms and conditions in order to avoid future misunderstandings.
4. Taking out a home equity loan
Do you have enough equity in your home? You can also consolidate these loans with the help of a home equity loan. What happens is you pledge your home equity to borrow the required amount. In this way, you actually consolidate your high interest rate loans to one with comparatively low interest rate. Moreover, interest paid on a home equity loan is tax deductible up to a certain extent.
By taking out a home equity loan, you can also save the money that you need to pay if you enroll yourself in a payday loan consolidation program. However, when you take out a home equity loan, you actually convert your unsecured debts to a secured one. Therefore, before pledging your home equity, always make sure that you'll be able to repay the amount at the end of the loan term as otherwise you may lose your home. So, assess your financial condition, plan a budget and make a repayment plan before taking out a home equity loan.