How Does Payday Loans Work & How To Exit Payday Loan Debt

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How Do Payday Loans Work & How To Exit Payday Loan Debt

Payday loans written on a piece of paper.

How Do Payday Loans Work & How To Exit Payday Loan Debt

Payday loans written on a piece of paper.

You never know what’s going to happen in a given day that will make your financial situation more difficult. Perhaps the loss of a job. Perhaps an emergency car repair. Or perhaps an expected medical expense. So many things can occur that can tilt that well-managed family budget into total disarray.

The Cycle of Payday Loan Debt

To be honest, payday loan companies look forward to these unexpected circumstances. After all it’s how they stay in business. Which is fine as long as they do it humanely. Too many times consumers find themselves involved in a vicious cycle.

This cycle is created by them not being able to pay off the entire loan on the due date. When this happens a fee is charged. So now the consumer has to pay the regular amount they borrowed, plus the extra fee applied. This will continue on and on, whereas only the weekly fee is being paid against.

If by chance the consumer can no longer pay for the weekly fee then the payday lenders will go ahead and cash the check that was offered initially. In most cases this will devastate the consumer’s situation even more. In desperation some consumers would open up a brand new payday loan elsewhere in order to pay off the first. Some consumers have been known to have 3 or more payday loans at once.

Many states have stepped up and have provided ways for consumers to exit payday loan debt. This can be done by the payday lender referring the consumer to speak with a payday loan debt consultant. In many places it is now the law for a payday lender to have trusted financial consultant information on hand for consumers that have fallen behind on payments.

Advantages of Payday Loan Consolidations

These trusted experts can give advice on how to exit payday loan debt. They are trained when it comes to payday loan debt consolidation. This type of consolidation will allow the consumer to do a couple of things. To consolidate payday loan debt each payday loan will have to be notified. The loans are then combined in one payment. Also to consolidate payday loan debt the consumer needs to be ready to work fully with the new lender and what they’re offering. Here is a list below of the advantages of consolidation.
  • Lower interest
  • Smaller payments
  • No more aggravating calls

When signing up for a payday loan debt consolidation agreement the consumer agrees to pay continue to make payments. However, the payments are smaller. This makes it extremely convenient for the consumer. The payday loan debt consultant could give the consumer advice on how to set up the agreement. Now they can relax a little and began to piece their lives back together.

But that’s not all. The interest attached to the loan is also greatly reduced. Also the phone calls from the payday lenders will cease. By law when the consumer signs up for a payday loan debt consolidation agreement, all calls from the payday lender must discontinue.

You can exit payday loan debt by participating in a payday loan debt consolidation agreement however, there is paperwork involved. The consumer must detail his/her finances, employment and more. It’s similar to an interview. The consumer must show that he/she is serious and are ready to give it try.

Advantages of Payday Loan Settlements

To exit payday loan debt, the consumer could also decide to participate in a payday loan debt settlement. This is not as complicated as it sounds. Payday loans are very expensive for a couple of reasons.

One reason is because they are unsecured loans. Not only are they unsecured loans, but they are loans that are given to people that have bad credit or no credit. In most cases as long the customer has a checking account and a job, they will be approved.

A payday loan debt settlement is normally arranged by using some form of collateral. The consumer will most likely need to put up for collateral his/her vehicle or home. A payday loan debt settlement combines all of the payday loans together and pays them off. So, that quick all the payday loans are gone. But now the consumer has to pay back the settlement lender.

This is much simpler for the consumer. Prior to the transaction, the payday loan debt consultant will explain to the consumer that they will need to keep up with all payments etc. The consumer will not have to be concerned with outrageous monthly payments. The payments will be reasonable and manageable. This is excellent news for the consumer.

A payday loan debt settlement, if approved can be a new starting point for a consumer that is drowning in payday loan debt. The agreement will include a specific date that the account should be paid off by. Also there may be a small fee for signing up for the agreement.

So consumers have choices when it comes to how to exit payday loan debt. They will need to sit and figure out what is the best option for them. To exit payday loan debt takes commitment and dedication, but it can be done. The cycle can broken.

The consumer will need to take a moment and figure out their needs. It may not be necessary to participate in a payday settlement. A payday consolidation may work just fine. However, the consumer will need to take into consideration that if one or two payments are missed, that the payday lender will have the right to began calling again. So making the payments and making them on time is important.

Some consumers may not want to be bothered by that. So they may opt to have all payday loans paid completely off. That way if any payments are missed they will be dealing only with their current new lender. Though their vehicle or another item may be used as collateral, in most cases the late payments would have to be excessive before the asset is in jeopardy.

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