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Credit Focus: Consolidating Payday Loans

pruden2Oh Payday loans – why do people do it to themselves? Sometimes it is the convenience, but more often it is because a payday loan is a no-questions-asked type of loan – all you need to do is prove that you work and have a chequing account and boom you’re approved – no credit report, no nothing.

Sure this may seem like an easy fix, but as the old saying goes, nothing worthwhile is easy. Payday loans are evil, there are no if, ands or buts about it. This week, we cover consolidating payday loans to help you get out of that vicious cycle.

Why are they so terrible? It really comes down to the sky-high fees. Many payday loan companies charge up to 20% as a borrowing fee just to borrow for 2 weeks. That is not 20% for the year like a high interest credit card, that is a 20% fee for 2 weeks.

That means, if you borrow $1,000 and your pay averages $1500 net bi-weekly, at a 20% fee you would have to pay back $1200 on your next pay period of $1500 leaving you with only $300 for 2 weeks to pay all other bills. Sure, that $1000 was handy at the time, but now that you have to pay it isn’t so convenient.

Payday loans are making big money when you borrow, so of course they want to make it easy. They also make it easy to roll over your loan too. Why? Well, because, for that initial loan of $1,000, they now earn $200 bi-weekly ongoing and you still owe the original $1,000! In 5 pay periods they have gotten their money back and you still owe the initial debt.

It is for this very reason that many people start out with 1 payday loan and good intentions, but then when they get paid they don’t have money left to pay the debt and so they roll it over and even take out another. Some people have 3, 4 and 5 payday loans going at a time and owe more in fees than they earn!

Consolidating payday loans is the only way to pull yourself out of the cycle. Often the reason people choose payday loans is because their credit just can’t stand up to traditional banks’ lending requirements. However, all lenders are not the same, and there are finance companies who offer bad credit loans to those struggling with problem credit. Look at what you can pledge as security. For example, do you own a vehicle you can leverage as an asset?

At Prudent Financial, we can help you get rid of that debt by consolidating payday loans and saying goodbye to them forever.

Call us today at 1-888-852-7647.

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