Can you get out of debt with a payday loan?

When you are in debt, it’s sometimes important for you to take care of it immediately. You may be willing to take up another debt by taking out another loan just so you can deal with the current debt. If having instant cash is what you need, then payday loans might be the thing for you, though using a payday loan to get out of current debts might get you into even more trouble.

  • What is a payday loan?

Payday loans are monetary loans

Payday loans are monetary loans

Payday loans are monetary loans provided to borrowers that must be paid in full when the borrowers receive their next paychecks. The loan amounts granted are typically small and are based on how the borrower’s salary.

Taking out a payday loan is certainly one of the fastest and best ways to get instant cash. No matter what your emergency is, requesting a payday loan will get you the needed money in no time. Since the service is really fast and easy to get approval for ( bad credit is almost never an issue as you can take out a bad credit payday loan just as easily), payday loans have very high interest rates which are higher than conventional bank loans.

This is because of the risk that payday lenders take by not seeking collateral from borrowers, lending money to applicants with bad credit history and only asking for basic personal information. With payday loans, the borrower usually borrows an amount of money that he can repay on his next payday. Being late in repayment is not a good idea as that will incur heavy penalties.

  • How much can you borrow?

Usually up to $1,000, though some lending companies restrict the size of the first loan they offer. Loan tenures could be less than a week or months occasionally. There are usually no early repayment charges, but there are fees for setting up the loan as well as interest which is usually calculated daily.

  • So, can you get out of debt with a payday loan?

The answer is yes. However, there is another important question you have to ask yourself and that is, should you get a payday loan to fix your debt?  The answer for that question is entirely dependent on your situation. If you are very sure that you can repay that loan on your next pay day, then go for it.

However, if there is even a hint of doubt, or you are just hoping that things just might somehow come together in a way that you’ll be able to repay the debt, it’s best that you look for other options.

10 things you need to know before consolidating a payday loan

1. Quick Access

We all know how annoying and unbearable debts can be. You realize that it’s hard to repay all the debts that you have. One type of debt is payday loans. You are expected to repay a payday loan when your next paycheck comes your way. It’s a short-term loan which requires you to pay the whole lump of cash all at once. Reason for taking up such a loan could range from being broke in the middle of the month before the next payday or due to an unexpected financial emergency. While loans could be life savers up to a certain extent, it could ruin your life too.

2. Payday cycle

Take help of a debt consolidation plan

Take help of a debt consolidation plan

So you may be wondering, how one actually gets into a big debt crisis, so big that it would need payday loan consolidation. For instance, you may take up a small payday loan, hoping that you will be able to repay it immediately once you get your next paycheck. Suddenly, an emergency hit. Perhaps you also need to pay your kids’ school fees, or have a medical bill which your insurance does not cover. So you take up another payday loan. Both loans are expected to be paid back when you get your next paycheck.

However, you realize that you cannot afford to repay both. Thus, you roll over the loans. Rolling over typically gives you a little more time to repay with paycheck you get the following month. However, there is a catch. The interest rate for the rollover amount will increase and so will the fees you have to pay.

Subsequently, your debt increases. You are stuck with the lender and having to repay large sums of money. Due to the roll over, you can’t keep up with the loan payment. The increasing amount of debt is about to stifle you.

Lenders love this situation. You need to get out of this situation with the help of a debt consolidation plan. Hence, you should consolidate payday loans and use that to your advantage.

3.  Outline your financial goals

To get out of the debt, you first have to know your financial goals. You have to plan where you want to be, where you are currently and how you want to get to your target. You should sit down and analyze your financial situation carefully.You to look at all your income sources, then compare them to what owe your lenders. Doing this math will help you establish your financial status.

4. Consolidation

 Consolidation

Consolidation

Having established your financial situation, it’s time to start thinking about the solutions. Typically, you want to get out of debt as soon as possible. Payday loan consolidation is one of the best ways to get out of recurring debts and increasing interest rates. However, it is important to be specific about what you actually want. There are 3 main types of debt consolidation companies.

1. Debt consolidation companies: they give you a loan to pay up all your debts and then you repay them slowly.

2. Debt management: these act as third parties who try to re-negotiate the interest rates that you are paying for your current debt.

3. Debt settlement: they are also third parties, but they negotiate to lower the principal balance of your debt.

This means that you have to be very precise with the type of plan you want.

 5. Research

Having decided the type of consolidation plan you want to embark on, you need to look at specific consolidation companies. It is always advisable to allow yourself as many options as possible. You could decide to pay them a visit and try to get all the details on the type of consolidation plans they offer. By giving yourself enough options, you have flexibility.

6. Review

countercheck the credibility of the company

counter check the credibility of the company

You mostly want to rely on the companies that care nonprofits. You have to look at what actually fits your current financial situation and can help you out of the payday loan debt trap. Nonprofits are the most suitable companies, mostly because they are not after making money from borrowers.

Whatever awesome adverts you may have seen, remember that what you see may not be what you get. Thus, it is always important to countercheck with financial authorities to confirm the credibility of the company you are interested to work with.

7. Interest rates

The annual percentage rate of the payday loans is about 300%. This means that the interest rates are quite high. While deciding on consolidating your payday loans, you have to look at the interest rates of every consolidation company. See if it fits your financial goals. The lower the rate, the better. Go through all the options you have until you find the best one.

8. Fees

lower the fees, more advantageous it is for you

lower the fees, more advantageous it is for you

It is important to look at the fees that come together with the consolidation loan you choose. You could be talking about fees that are incredibly high, so you need to look for the lowest fees among your choices. The purpose of the consolidation loan is to let you improve your financial situation while you pay off your consolidation loan. Thus the lower the fees, the more advantageous it is for you.

9. Terms and conditions

A consolidation loan definitely comes with a contract. Signing it will let you be bound by whatever terms which are stipulated in the contract. The terms include things like the time of repayment, the interest rates, and the penalties if you don’t pay up. You have to look for terms that are as flexible as possible. Also, you have to negotiate for breathing space, for if you leave the whole responsibility to the lender, he may decide to suffocate you as you try to look for a way out of the debt situation. This could leave you in worse situations that you were initially.

10. Doing the math

The most important thing is simple to keep up with the numbers. For a good loan solution, you have to weigh the possibilities and make a sound financial decision. It’s all about knowing your numbers and taking them into consideration before making any Payday Loan debt consolidation decision.

Payday loans vs installment loans

A loan refers to money borrowed by a debtor from a creditor that is to be paid back at an agreed time at an agreed interest rate. There are different types of loans for the borrower to choose from depending on which type suits his financial circumstances best. These loans include car loans, payday loans, personal loans and consolidated loans. Most of these loans are considered installment loans since the borrower pays the lender back in scheduled monthly payments. Borrowers should understand the differences between payday loans and installment loans to know what loan works best to their advantage.

Payday loans

 short-term unsecured loan

short-term unsecured loan

A payday installment loan is also referred to as a payday advance. It refers to a short-term unsecured loan that is given to a borrower where he is expected to make payments on his next payday. Payday loans are usually associated with high interest rates as compensation for creditors who face dangers of the borrower defaulting repayments.

The creditor cannot perform collection activities if the borrower does not make payment as payday loans are of an unsecured nature. Hence, they do not require you to put up property as collateral.

Payday loans have a simple but expensive application procedure which. It involves you writing a personal check for the amount of money you want to borrow. You are also expected to pay a certain amount of money for borrowing as application fee. Payday loans take a very short time to be processed. Borrowers receive their funds in their checking account electronically, fast enough to meet their immediate financial needs. Lenders of payday loans ask for little verification which make qualifying for payday loans quite easy.

Payday loan lenders require verification of employment or income which is determined through recent pay stubs and bank statements. This financial information acts as a guarantee that the borrower is in a position to make repayments.

Online payday loans offer consumers fast application and upon approval the funds are deposited directly into the borrower’s checking account. The repayment procedure involves financial charges being withdrawn electronically on the borrower’s next payday. Payday loans come with certain advantages that appeal to many borrowers.

Advantages of payday loans

Payday loans are easy to get

Payday loans are easy to get

1.Easy to get: Payday loans do not involve tiresome procedures and complicated requirements. This makes it easy for borrowers to get a loan. The basic requirements are quite simple and the lender only requires you to have a stable job and a recurring income to qualify.

2. Fast to get: Most payday loans are transferred electronically into the borrower’s checking account. Upon filling out an application form and having your loan approved, you will have the cash you need really fast.

3. Convenience: Payday loans are convenient as they are readily available. Payday loan companies are located throughout most cities. Availability of online payday loans has made it easier for all borrowers to access this loan online.

Disadvantages of payday loans

Payday loans can harm your credit score

Payday loans can harm your credit score

1. They are expensive: This is a major reason why most people shy away from payday loans. Interest rates of a payday loan are extremely high which is linked to the risk faced by the creditors if the borrower defaults payment. Application fees are also charged to borrowers which makes borrowing a payday loan expensive.

2. Payday loans can harm your credit score: As payday loans are expensive, borrowers are often burdened by this high cost. So they may delay in making payments which would adversely harm their credit score.

Installment loans

Installment loans considered to be less risky

Installment loans considered to be less risky

An installment loan is a type of loan where the principal amount and interest are repaid back in scheduled payments known as installments. Compared to payday loans, installment loans are considered to be cheaper and less risky.

Installment loans are either secured or unsecured, depending on the type of installment loan. Mortgages and car loans are secured where the borrower is expected to put up his house or vehicle as collateral to get the loan. Personal installment loans, on the other hand, are unsecured and their borrowing is based more on the borrower’s creditworthiness and proof of income.

Advantages of Installment loans

do not have credit checks

do not have credit checks

1. Fixed interest rates: It is quite distressing when you wake up to hiked interest rates. Some traditional forms of borrowing have varying interest rates which would in the long run, thereby increasing the borrower’s sum of repayment.

With fixed interest installment loans, your payments remain the same since its interest rates are fixed right from the beginning. You know exactly how much to pay every month. With this knowledge, you can budget your finances carefully so that you can make repayments promptly every month.

2. Longer terms: Long term installment loans can be as long as 30 years. During this period, the borrower can spread out their repayments over the loan term at his or her convenience. This makes installment loans more flexible than other short-term loans.

3. Easy and fast to acquire: Once you have applied for an installment loan and it is approved, you can get the money when the lender deposits the funds directly into your checking or saving account. Qualifying for an installment loan is very simple.

The borrower has to meet the minimal age requirements of 18 years and older. You should also have a recurring income source. You must also provide a valid checking or savings account where you can receive your funds.

4. No credit checks: Some installment loans do not check the borrower’s credit score. Borrowers with bad credit or no credit can borrow payday installment loans.

Installment loans disadvantages

Risk of losing property

Risk of losing property

1. High Interest rates: Due to the fact that interest rates for installment loans are fixed, some lending companies may take that opportunity to charge outrageous rates. This would adversely increase your loan repayment amount.

With the help of an installment loan calculator, you may avoid this pitfall. The installment loan calculator estimates for you the monthly payments and interest rates you are required to pay for the type of loan you choose.

2. Risk of losing property: There are installment loans that require borrowers to put up a collateral in order to secure a loan. In the event that he delays repayment, the creditor has the legal right to call for collection activities. In the long run, the borrower could lose his collateral.

Differences between payday loans and installment loans

Difference B/w payday & installment loans

Difference B/w payday & installment loans

Both payday and installment loans are associated with high interests and they can be easily available without subjecting the borrower to any credit checks. Despite their similarities, they also have their differences.

1. Payday loans are unsecured while installment loans can be both secured and unsecured depending on the loan type.

2. Payday loans are short-term loans that should be repaid on the borrower’s next payday. Installment loans provide longer term borrowing of up to 30 years.

3. Payday loans are paid using a post-dated check. For installment loans, lending companies electronically withdrawn or the borrower pay using a check every month.

4.  Payday loans have extremely hefty interest rates that may be as much as 390% whereas an Installment loan can only go up to about 90%.

How to choose the best loan for yourself

There are certain things you should consider before deciding on the type of loan to use. These include:


Interest rates

 

choose loan with lower interest rate

choose loan with lower interest rate

It is imperative that you choose the type of loan with a lower interest rate. This is because with a higher interest rate, you may end up paying much more in the long run which may force you to take out another loan to repay the former one. Installment loans have considerably lower interest rates compared to payday loans.

Effect on your credit score

Both types of loans may have a negative effect on your credit score if you delay in making payments or in the event that you default. However, making your installments on time every month can help repair your bad credit score. Payday loans, on the other hand, do not improve your credit score.

Repayment preferences

Payday loans are short-term loans. This means they have faster maturity dates and you are expected to repay the loan within a short time, usually by your next payday. Long-term installment loans can take up to 15 years, hence allowing you to plan manageable repayment schedules. This makes installment loans more flexible compared to any other forms of short- term loans. Get an installment loans calculator and see what you are missing on!

Payday loans vs installment loans

There are many different types of loans for borrowers to choose from. Car title loans, mortgages, consolidated loans, payday loans, personal loans and loans from insurance policies are all examples. Many of these loans are considered installment loans because the borrower pays the lender back in scheduled monthly payments. A payday loan is usually made in one repayment amount by the borrower’s next paycheck. That’s the main difference between any type of installment loan and a payday loan. However, is one better or worse than the other?

  • What is a payday loan?

What is a payday loan

What is a payday loan

Payday loans are a relatively new invention that came into existence in the early 1990s. Originally, payday lenders began exclusively as small shops where borrowers could visit them personally to apply for quick cash. Today, while those physical shops still exist, many payday loan transactions are done online from the comfort of one’s very own home.

Taking out a payday loan is one of the fastest and best ways to get instant cash. No matter what your emergency is, requesting a payday loan will get you the needed amount of money in no time. Since the service is really fast and easy to get approval for (you usually get no credit check payday loans), payday loans have very high-interest rates which are higher than conventional bank loans. That’s because payday loan lenders take a risk in not seeking collateral from borrowers, only asking for basic personal information and lending money to applicants with bad credit.

With payday loans, the borrower usually borrows an amount of money that he is confident of repaying on his next payday. Being late in repayment will result in hefty penalties.

  • Payday loans advantages

There are many advantages of payday loans.

1. Very easy to obtain

Just about anyone with a stable job can apply for a payday loan.

2. Really fast

All you have to do is fill out an application and in a few minutes, you will be approved and have the cash you need. The loan amount can also be transferred to your bank account.

3. Very convenient

Payday loan companies are located throughout most cities and are really easy to find. Nowdays, there are many online payday loan services. This means when you are ready to take out a loan, there is always going to be one available somewhere near you.

4. Always a last resort option

When there seems to be no way to get out of a difficult financial situation  payday loans are always there as a last resort option. Since their terms are relatively lenient, payday lenders will provide instant cash  even when no other options are available.

  • Payday loans disadvantages

It’s expensive

It’s expensive

There are a few downsides to payday loans that are worth considering before taking out a payday loan.

1. It’s expensive

The interest rates of a payday loan are known to be some of the highest. For many borrowers though, the convenience and speed of being able to obtain money with a fast payday loan when it’s needed is enough to make up for the high interest rate that comes with one.

2. Scams

There are some scam lending companies, so it is important to know you are dealing with a qualified and legitimate lending company before taking out the loan.

3. Borrowing can become cyclical

It’s important that you do a careful financial planning to prevent lagging behind on your repayments. It’s easy for you to fall into a debt cycle that only gets worse over time.

  • What are installment loans?

installment loans?

installment loans?

An installment loan is a loan in which the principal and interest are repaid in equal installments at scheduled intervals (usually monthly). Installment loans are considered to be less risky and cheaper to borrow than payday and title loans. The repayment terms of an installment loan can be as short as a few months or as long as 20 years. Installment loans are usually secured by the personal property of the borrower.

Installment loans have been around much longer than the 90s. They were initially offered only by small, independent lenders, but eventually were adopted by most major banks.

installments at scheduled intervals over an agreed period of time.

Installment loans typically grant borrowers much larger amounts than payday loans. For $1,000 to $10,000, borrowers can approach installment lenders for a loan to pay off recurring bills, home mortgages or medical expenses.

Installment loans are usually repaid over a long period of time which can be as long as 30 years. When taking out an installment loan, the borrower must use a lending institution that operates in the same state where he is staying in as all installment loans are serviced locally.

Similar to payday loans, you can get Installment loans for bad credit or installment loans with no credit check at all.

Installment loans are fast as they take only one business day for the money to be deposited into the borrower’s bank account.

  • Installment loans advantages

Similar to payday loans, there are a lot of installment loan advantages such as:

1. Predictable monthly payments

When you take out an installment loan, there is a fixed interest rate. Your payments will always be the same because the interest rate is already set up at the time when you take out the loan. You will know exactly how much to pay every month.

2. Longer terms

The repayment terms of an installment loan can be as long as 20 years or even more.

3. Easy and fast

It’s very fast to get your hands on the money when you take out an installment loan. Usually, you can get the money deposited directly into your account in just a couple of days after being approved for the loan. Otherwise, you may get the loan amount in cash.

  • Installment loans disadvantages

There are some disadvantages in installment loans that are worth careful consideration before signing up for one:

1. High interest

Even though the APR (annual percentage rate) of an installment loan is not as high as that of a payday loan, it’s still going to be high. After making the payments in full, you can even end up paying more than you would with a payday loan.

2. Penalties for missed payments

If you fail to make your payments on time, it can cost you a lot more than you thought.

3. Personal property risk

There are types of installment loans that require you to put up your personal property as collateral.

  • Payday loans and installment loans differences

Payday loans and installment loans differences

Payday loans and installment loans differences

Both payday loans and Installment loans are considered to be “high-cost, small-dollar” loans. Usually, they come with high interest rates and are extended to people with rather imperfect credit scores or with a specific income level. Even though the two types of loans are similar, there can be some big differences too.

1. Payday loans range from $100 to $1500; installments loans range from $150 to several thousands of dollars.

2. Payday loans are short term and are to be paid back within 30 days. The shortest tenure for installment loans are a few months.

3. Payday loans are repaid through a post-dated check; installment loans are directly withdrawn or paid using a check each month.

4. Payday loan’s APR can be as much as 390%; APR on an installment loan ranges from 25 to 100%.

5. Payday loans are unsecured; installment loans are usually secured but can be unsecured too.

6. Payday loans can be rolled over when it’s due (plus new fees); installment loans can be renewed every few months (with additional fees and interest).

  • Which loan should you get?

There are a lot of things to consider when deciding

What Happens if I Am Unable to Payback My Payday Loan?

Unable to Payback Payday Loan?

Unable to Payback Payday Loan?

Payday loans can be a great way to get a quick influx of cash when an emergency, such as a broken down car or a medical bill, hits. However, because people tend to take out payday loans online when they are already having financial troubles, sometimes it can be difficult to pay them back.

Although you should try and pay back any loan as soon as possible, payday loans are unique in several ways. For one, since payday loans tend to be in small amounts and for a short term, the interest rate can be very high. This might sound worse than it actually is. Yes, the interest on the $500 loan will be significantly higher than the interest on a banks $10,000 loan, but that is because the original number is already much smaller.

Generally, if you cannot pay back a payday loan on time, one of two things will happen. The first is that your lender will try and withdraw the agreed upon amount from your account and, if there are insufficient funds, this could cause the bank and your lender to charge you fees. To avoid this, you can almost always talk to your lender and have him extend the loan for a small fee.

Although it is not ideal to not pay back your payday loans, in most states, your lender will not be able to sue you or garnish your wages, and in no instances can you be sent to jail for not paying back a loan of any kind. Still, just like any loan, payday loans should be paid back in the agreed upon fashion. Before taking out a loan, be sure to look at the terms and agreements so that you know exactly what you are agreeing to.

Since payday loans generally don’t have much more of a risk than any loan, and since they are a good way to get cash quickly in an emergency, you can use gadcapital.com to find a payday loan lender today! Just fill out our online form and get connected with lenders now!