There are many different types of loan and credit facilities available to people in modern day life. From personal loans and payday loans, to mortgages, vehicle leasing, credit cards and overdrafts, choosing the right financial product for your specific needs is difficult. If you are looking at a short-term financial problem that requires immediate attention, you should look to work with a responsible payday loan lender, that can offer you short-term respite, with a view to you paying back the debt over a pre-agreed period of time (either next payday, or for slightly larger debts, over the course of a few months). What happens though if you have several smaller debts that you are paying interest off and you want to get back to a simpler process? A consolidation loan could be the answer.
If you are struggling with multiple credit repayments, a debt consolidation will move all, or just a portion of your existing debt from different accounts to just one account. So any debt you have on multiple credit cards or store cards, can be moved to one account. You would pay off all the old accounts using a brand new consolidation loan that covers all of (or as much as you’d like of) the old debt.
There are several reasons why you might wish to consolidate multiple debts into one place. For many people it just makes for a much simpler way to budget. Instead of having to work out various balances, payments and statements each month and work out the best days to make payments, you’ll have one set monthly payment to take care of, on the same date each month if you have set up a direct debit.
With this approach you have a much easier way to see what your debt actually looks like, knowing exactly how much you owe, how quickly the sum is going down and how much interest you are being charged. It could also allow you to take advantage of a lower rate, though this isn’t always the case or only for a short promotional period in some cases.
Always be aware of the total cost of the new loan, as it could mean you pay more in interest over a longer period than you would by maintaining the multiple debts. Also take into account the set-up and administration fees attached to the new loan, as this might be cost prohibitive in the first place.
Remember, consolidating multiple debts into one, simple, more manageable debt, might make sense for you, but it doesn’t always make for the most effective debt repayment plan for everyone. In some cases, it could be easier to stick to the payment plan, if you have a payday loan with a reputable and responsible lender, with no hidden charges and a pre-set timeframe to pay off the debt over the course of a few weeks and a few months. If you are struggling to pay back a payday loan, contact your lender immediately and ask to speak to your contact about freezing interest or taking a payment holiday in order to get back on track. If this isn’t possible at all, then seriously consider alternatives, such as a consolidation loan.