Payday Loan Consolidation Companies
How debt consolidation works
Consolidating debt is the process of combining multiple bills into one payment, then eliminating it through a loan or relief program.
Consolidating debt is a way of making bill-paying simpler by consolidating your payments at lower interest rates.
What kinds of debts can be combined?
Many debt relief agencies can help you pay off your unsecured loans, including
- Credit cards
- Personal loans that are not secured
- Payday loans
- Hospital and medical bills
- Credit cards for department stores
- Collections accounts and certain utility bills.
Some companies will require that you have at least $7500 in unsecured debt. Most debt consolidation companies cannot help you with secured personal loans and mortgages.
Each of the six companies on our list has a proven track record and can answer any questions you might have about debt elimination.
Debt consolidation options
Consolidating debt can be done in many ways. It all depends upon your financial situation and how disciplined you are about sticking to a budget.
These are the options for consolidating debt.
- These agencies, which are non-profit credit counseling agencies, administer debt management programs.
- Consolidating debt via personal loans, home equity loans, home equity credit line credit, balance transfer credit, or 401k withdrawal
- Settlement of debt
Benefits and disadvantages of Debt Consolidation programs
Consolidating debt can simplify your bills. Instead of paying multiple bills every month (four, five, or ten), you will only pay one.
Consolidating debt has other benefits:
- The interest rate charged by credit card companies should be lower than the one-off rate.
- A lower interest rate should result in a lower monthly payment.
- An affordable monthly payment will help you repay your debt faster.
- Your credit score will improve if you make timely payments.
As long as you stick to the program, consolidating debt is a good idea. Some of the cons are:
- You might be tempted to use your credit cards again if you have to pay off the debt.
- Consolidating debt may lead to higher loan costs.
- You will be penalized if you don’t pay your bills on-time
- Secured loans can put your assets at risk.
What to look out for in a debt consolidation company
A good working relationship is key to debt consolidation success.
You will feel relaxed when you work with a good debt-relief company.
You must understand the compensation of credit counselors. It is important to flag any bonus they receive for selling services they don’t sell.
Customer service is essential. It should help you understand the root causes of your problems with debt and show you how to fix them.
You want a firm that is open about its business practices and discloses all terms.
The best place to evaluate transparency is a company’s website.
This information should be on every company’s website:
Are they still in good shape?- How long has the company been operating?
Who are they? Is there a page that lists the company’s top executives, physical addresses, hours, and telephone numbers?
A selection of programs- Can they offer loans? Management Plans how do you settle your debt?
Costs and fees. Are all fees for loans and programs (origination fee/monthly charge, late payment fee, etc.) listed? If they offer consolidation loans, what are their interest rates?
The time frame for the program. What is the repayment time for debt? If you take out a loan, is there a prepayment penalty?
Eligibility. Do you need to have the ability to repay minimum amounts of debt? Is there a minimum credit limit score you require? These personal and small-business debts are not allowed?
Customer service- Are you able to have a counselor assigned to your case? Can you communicate with them online? Is there a website that allows objective evaluations of company performance
If a company has nothing to hide, it should not be afraid to post all information on its website to assist customers with their credit problems.
Trustworthiness and Longevity
Trust is built when companies are around for at least 10-15 years.
The Better Business Bureau has accredited many companies involved in debt consolidation. The Better Business Bureau also lists the number of complaints received and the resolution of those complaints. This information could be used to help in making a final determination.
Counselling and Education
When choosing a debt consolidation company, education is important. How can you use this experience to avoid future problems?
The majority of debt consolidation nonprofits are responsible for counseling and educating consumers. The Internal Revenue Service requires nonprofits to offer an educational component to their services to maintain their tax-exempt status as 501(c) and (3) organizations.
Credit counseling is almost always free for non-profits. Counselors examine a person’s finances and discuss how to manage their budgets.
You should ensure that counselors are properly trained and certified.
Avoiding Debt Consolidation Scams
In the industry of debt relief, scammers are common.
These are the things to look for when choosing a company.
- They claim nonprofit status even though they are for-profit companies.
- Guarantees to pay off your debts for pennies per dollar
- Before reaching a written agreement, you should seek fees for services.
- Pushy sales pitches ask for you to make a decision that will need research quickly.
- Promises of quick fixes
How to choose the right debt consolidation company
It can be difficult to choose the right debt consolidation company. However, you can make it easier by following these steps.
Step 1: Do your research
This information can be used to evaluate your financial situation and determine if it is resolved.
Step 2: Assess Your Strengths
A debt management program may be a better choice if you don’t have enough income to pay off your debt but can manage your finances more effectively than a consolidation loan.
Step 3: Identify Your Weakness
You might think about debt settlement if your debts have gotten out of control.
Step 4. Make a careful choice.
It is important to find a company that offers the debt consolidation program that you need, is easy to work with, and can educate you throughout the process.
Step 5: Be realistic about a timeline.
Consolidating your debt can help you get rid of all your debt within three to five years.
It is not an easy task.
Once you have decided, it is important to realize that even the most respected debt consolidation companies won’t give you the tools necessary for getting out of debt.
With the help of a debt consolidation company, all that digging will be worth it.