What do you do when you have lent instant cash loan after instant cash loan and are struggling to repay one or more of the lenders the agreed monthly amount?
Carry on taking out more same day loans until your salary is in negative equity, in effect, even before you’ve been paid? With the ease of obtaining these quick loans, this is an easy spiral to start but the whirlpool effect will soon have you struggling against its dreaded pull if you’re not extremely sensible with the amount you’re borrowing.
This fact has not been escaped by many of the larger high street lenders and online loan specialists. Many are now offering a lifejacket to at least help you keep your head above water, even if you’re paddling like mad under the surface to stay afloat.
What is instant cash loan consolidation?
You may have, in effect, taken out a large loan but in a number of small chunks with different lenders, therefore are repaying a much larger amount than you originally budgeted for over a varied range of repayment interest rates.
Some of the payday advance loans may have been taken out at a low interest rate, depending upon how much you have agreed as your monthly repayment sum when you took out the loan.
On the flip side, some of ‘no credit check loans’ you may have applied for could be at a much higher repayment rate. In order to possibly reduce this interest rate and group all of your outgoings in one place, a lender may decide to offer you a lifeline by buying all of your other debts, making one large loan instead of several small ones.
How does debt consolidation work?
Because the value of the loan is much bigger, the new lender should be able to offer you a more competitive interest rate, hence making your monthly outgoings smaller (assuming that you paid all of the other creditors).
If one of the lenders has become aware that you are in trouble by the company looking to consolidate your loan approaching them, they may even offer the new lender a reduced sum; the new lender can either keep that saving or pass it on to you to help you out of the mire even further; since they now own the debt, that is their prerogative.
What’s the catch?
The catch is simple – you must agree not to take out any more loans, at least until this one is repaid.
In truth, if you are looking for this type of consolidation loan, your credit report will have a score next to it similar to individuals who have applied for insolvency or bankruptcy, so you are unlikely to be able to obtain further credit in any case.
This sort of loan will help you get back on the road to recovery, especially with ‘credit counselling’ that may be offered as part of the agreement, but prevention is really better than cure. Payday loans do come in handy, but only if you know you can afford to repay them.