Payday loans are very popular yet very problematic for borrowers. These are popular because the approval of the payday loan is instant and the borrower gets cash to pay his debts or meet regular or recurring expenses. The negative side of payday loans is high-interest rate and ambiguous charging fees which ultimately lead the borrower to get further loans for repaying the actual loan. Payday loans are called predatory loans because over 80% of payday loans are rolled over or re-borrowed until the borrower ends up with the only option to seek assistance from a reliable payday loan consolidation company to get rid of endless interest and processing fees payments.
Why people get payday loans?
Payday loans are short term loans and are usually taken to make payments for urgent requirements. Usually, this is the small amount which the borrower believes to pay off with the next check from his company or workplace. Payday lenders come forward to help the borrower in such emergencies and offer instant cash. The borrower is happy to get the needed cash and make urgent payments. However, trouble appears when he learns on the salary day that after making payment of the processing fee and the interest amount, he is left with an insufficient amount to manage the whole month’s regular expenses. At this stage, the lender offers to adjust the payment for the next month for a small extra fee which keeps rolling over unless it becomes a huge amount beyond the resources of the borrower.
Payday loan interest rate and fees
Every year, 12 million Americans take payday loans and 36 states allow payday lenders to operate their business in the states. The payday loans are for a short term and the borrower gets a loan to clear the urgent expenses, he is supposed to pay back the amount along with the interest and processing fee on the next payment cycle. However, on average, the borrower has to pay around $520 for a loan of $375 for a term of two weeks. Hence, the majority of the borrowers are unable to make this payment and re-borrow more to make the payment of the initial amount.
How to get out of the payday loan problem?
What if the payday loan is not available? A payday loan is not the only option in case an emergency arises and the borrower may avoid taking a payday loan if it was not that easy to get. A recent survey shows that around 80% of the borrowers believe they would cut back on expenses or would have delayed the bills to meet the urgent expenses.
Payday loan consolidation
Payday loan consolidation is the better option if you believe you cannot get rid of the interest and processing fees. Many services can consolidate payday loans to make your life easier and you can get rid of bankruptcy and legal escalation threats.
It is possible to consolidate payday loans now with the help of payday loan consolidation companies.
Two simple options would get you out of the payday loan problem. First, get a personal debt consolidation loan and pay off the debts in full if you have a good credit score. If you don’t have a good credit score, then you may need to ask help from the payday consolidation service so they may call each of your lenders and negotiate with them and start a debt management program to reduce the interest rates and stop late payment penalties. In many cases, any of these methods would get you out of payday loan problems.