Too Many Payday Loans Consolidation
Too many payday loans are now covered with a “No Payday Loans Consolidation” policy. These policies have been widely advertised, especially with the threat of bankruptcy looming. This threat is usually used to scare the consumers into making a decision to close their accounts and avoid a possible hardship.
A quick-fix solution to over-extended funds
This process has actually been used by the loan companies as a quick-fix solution to over-extended funds. The process does not really help the borrowers in any way, as these claims are not true. It does not mean that consolidation is always beneficial for a borrower as the borrower still end up with a high interest rate in the end.
The first thing that is important in this situation is whether the borrower has a bad credit history or not. If the borrower has a bad credit history, then he/she may not be eligible for the loan even if he/she can repay it in full. The bad credit history is already the major factor that hinders a person from getting a loan.
The most common ways for a borrower to eliminate his/her debt is to reduce the monthly payments or to take out a new loan. The second option will not work as the repayment process will be stopped when the borrower defaults on the first loan. Borrowers have to choose which of the two methods will work for them before they decide to consolidate the debts.
A bad credit history and they do not qualify for a loan
There are people who have a bad credit history and they do not qualify for a loan even if they make all payments in full. The lenders will not consider these people as an easy target for their loan offers. They will give you the next best option that will satisfy the lenders rather than taking on a risk with a borrower with a bad credit history.
The borrower should try to resolve the problem as soon as possible, if he/she does not pay the loan in full, the lender will simply file the case against the borrower. If the situation is serious, then the borrower should talk to his/her financial advisor to get a loan modification approved. Even if the borrowers are able to get a modification, the bad credit history may affect his/her future loans if the loans are not paid on time.
When a borrower has a bad credit history, the lenders will not offer him/her a loan. They might just inform him/her that he/she will be required to apply for another loan which he/she might not be able to pay back with the current amount of funds.
An account with a lender who is already closed
Too many payday loans consolidation might also happen if the borrower has an account with a lender who is already closed. All kinds of shady transactions will take place if the account is already closed. This means that the borrower will only have one payment every month.
Another reason why it would be good to consolidate the debts is because of the high interest rates. The high interest rates may be costly for the borrower especially in a country like the United States where there is a shortage of funds. Borrowers should seek other options or find another lender in order to find a cheaper monthly payment.
If the borrowers are going to pay back the loan in full, then the rate will be reduced but it will still be expensive. This kind of scenario could only occur if the loan was taken with a little interest. When the rates are increased after the payment is already at an amount that is more expensive, then the borrowers have no other choice but to resort to bankruptcy.
After they decide to file bankruptcy, their credit rating will be destroyed and it will take years to recover. The risk of filing bankruptcy can be avoided if the borrowers choose to consolidate the debts before going tobankruptcy. All debts are rolled into one single loan.
When the borrowers are in debt, it would be better to get an estimate from different lenders. The lenders will all provide different services and rates, so the borrower should compare the rates that are offered to them to see which one can offer the lowest payment plan.