If you don’t have a credit history and lack cash flow, you probably know what payday loans are. Payday loans and other no-credit-check loans aren’t ideal lending options, thanks to their high-interest rates. Therefore, it’s best to avoid this type of arrangement entirely.
If you are left without recourse and find yourself in debt, you might want to consider payday loan consolidation. Companies like DebtHammer offer consolidation programs specifically for payday loans.
Let’s take a closer look at how a payday loan consolidation program can help you.
What is Debt Consolidation?
Essentially, debt consolidation is when you take out a loan to cover your existing debts. Payday loans generally have extortionate interest rates and only offer 30 days to pay.
As you can imagine, having short payment terms with high interest isn’t conducive to getting ahead of your debt. The idea behind consolidating them is to extend your payment periods while lowering your interest rate.
The advantages of consolidation are as follows:
- Lower interest rates. Loan consolidation companies, like DebtHammer, usually offer considerably better rates than payday loan companies. However, there are also non-profit organizations that provide interest-free consolidation loans.
- Extended terms. The no-credit-check loans generally have short pay periods. On the higher end of the spectrum, you can expect maybe 60 days. Consolidation loans buy out all your existing agreements and allow you more extended terms.
It’s not uncommon for this type of company to offer six months to pay off your debt. It makes a lot more sense since you’ll have more time to parcel out your payments and won’t be left short of cash.
Many payday loan companies leave you needing a second loan because you spent so much on your existing loan. Consolidating allows you to catch up to your debt without compromising your ability to pay your general bills.
- Credit history. No-credit loans generally don’t help you to build your credit score and establish. However, an unpaid debt of this type can still negatively impact your credit. It isn’t easy to maintain a loan that isn’t allowing you to build the credit you need–especially when your lack of credit history was the initial problem.
However, if you take out a consolidation loan, you’ll be building a credit record while also paying off your existing debt. Not all consolidating companies help with your credit history, so read the terms carefully before applying.
Conclusion
It’s best to avoid payday loans entirely, but we understand that sometimes it’s the only option. If you have payday loan debt and you can’t get ahead of it, consider consolidating. You’ll be able to pay less on your loan over a longer period while boosting your credit score.