Payday loans are expensive and many people get into trouble by trying to use them as more than a stop gap solution. Since these loans are easy to qualify for, many people will take out one to start, then they will get into a big hole. Because the interest charges on these loans are so high, people will chase one loan after another. After a while, they have multiple loans with multiple providers and the fees on these loans are way too high to pay. When you start extending the loan terms, you are going to pay even more, so it makes less financial sense the longer it goes.
Luckily for folks who find themselves in this type of situation, there is a solution. More and more today, people are getting debt consolidation loans to pay down these payday loan commitments. You might think that this makes little sense, since it is basically transferring debt from one lender to another. The key behind this idea is that payday loans have a much higher cost both in interest and in the fees that they charge when you are late with a payment. It can save you a lot of money to just stop chasing payday loan after payday loan and settle up with a consolidation loan.
What folks have to push aside when they get a loan is the fact that those loans carry 300% yearly interest in many scenarios. This is a huge number and it makes them financially irresponsible if used for anything more than just a stopgap. Consolidation loans can come in at a rate under 20%, so you see the savings there. Likewise, consolidators give you loan terms that make much more sense. It is easy to pay off a loan in monthly installments when stretched over a couple of years. With payday loans, everything is due the next month, so you can lose money quickly that way.
Paying high interest rates on payday loans is a good way to get in trouble quickly. You will have more debt than you know what to do with and you get no benefit from that. Instead of panicking and taking out more loans to cover your debts, slow down and recognize the solutions that exist. When you consolidate these payday loans, you will have a chance to breathe and pay them down at a rate that is not incredibly high.
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