So how does Payday Loan Consolidation work? Payday Loan Consolidation basically means taking out another loan, usually a secured loan, and using these funds to pay off any outstanding balances on your existing payday loans. This will save you money in the short term because these loan forms tend to have much less interest rates than standard payday loans. The downside is that in order to take out this kind of loan you need to have decent credit, and since most people don’t have decent credit it can be difficult to get one.
The Best Way To How Late Payday Loan Consolidation Can Affect Your Credit Score
If you are looking for an effective way to make ends meet each month but don’t have a lot of extra cash on hand then consider checking out the option of payday loan debt consolidation. This is where you use your credit cards or a home equity line of credit (HELOC) to take out one larger loan to cover your various payday loan obligations. Now instead of making multiple payday loan payments you make just one payment to the lender, who then pays your creditors one at a time. Because the interest rate is usually lower on this type of debt consolidation loan than it would be on a payday loan you end up paying more in total in a year than you would with many separate payday loan payments.
Because you now have one loan to pay off instead of several, your overall debt load is less. But this isn’t always enough to offset the damage done by missing or late payday loan consolidation payments. In fact, if you have several debts that are being paid off separately by yourself then chances are your credit score will be impacted negatively. Since you have one large debt and it has a higher interest rate than other small debts you will be hit harder by the debt collectors. However, because you now just have one single consolidated debt to worry about, your credit score will typically be impacted less severely.