Payday loans are a very convenient financial tool when times are tough. However, they also come with high risks because defaulting on one payday loan can quickly spiral into an avalanche of debt.
If you have several outstanding payday loans, you should get payday loan consolidation help as soon as possible. Borrowers who do not take charge of their debts early face the prospect of bankruptcy.
In the long term, the stain of bankruptcy will remain on your financial records for many years, and it may make it harder for you to find employment, start a business and or new loans.
Former bankrupts are also usually charged high interest and given less favourable loan terms.
Payday loans are short-term loans capped at borrowers’ one-month salary and have to be repaid in full (with interest) either exactly one month after borrowers receive the loan or by their next payday.
Some borrowers take multiple payday loans from different lenders as they are unable to get the full amount they require from a single lender. This allows them to scrape by for the present.
However, when payday arrives, they might have difficulty repaying all their loans due to insufficient funds. If their loan repayment dates are on different dates within the month, it can be tough for them to manage as well.
If you are facing this situation, you might need payday loan consolidation help.
A payday loan debt consolidation plan will help you merge all your debts into a single one under a single lender, and this lender will pay back all your other payday debts to the various lenders you have previously taken a loan from. This way, you only need to repay a single loan with a single lender.
Payday debt consolidation plans offer a distinct set of advantages. You only deal with a single lender, so:
- You are clearer on how much you need to repay every month (instead of having to calculate all the various repayment sums from different loans)
- It is easier to manage the loan repayment dates because the installments are due on a single date every month
- You will be less confused as there is only one set of fees and penalties to understand
Additionally, It gives you room to breathe since the loan does not have to be paid by your next payday but can instead be paid over several months in installments. Most debt consolidation plans also come with significantly lower interest rates than payday loans.
Note that the loan terms of the typical payday consolidation loan plan are very similar to personal loans in terms of interest rate, loan tenure, fees and administrative procedures.
Find out here if a payday loan consolidation help is right for you and you may want to check out some common misconceptions borrowers often have about debt consolidation loans.
There are 2 main sources of debt consolidation loans in Singapore: banks and licensed money lenders.
Payday loan consolidation help from each of these two options comes with its own set of rules, eligibility requirements and pros and cons.
What are the pros and cons of getting a payday consolidation loan with licensed money lenders instead of banks?
More Singaporeans have begun to understand that the big banks do not necessarily offer the best financial solutions for everyone. That is especially true with debt consolidation loans.
Taking a payday consolidation loan with licensed money lenders offer these advantages:
- Simple application process – minimal document requirements and financial history checks will accelerate your loan application. You can also apply for it anytime online.
- Fast approval – a streamlined approval system means that you get the cash you need more quickly, usually within a day.
- Less stringent credit checks – banks will refuse most borrowers with bad credit but licensed lenders are less rigid with their eligibility criteria.
However, there are also disadvantages to debt consolidation loans. The main disadvantage is that bank interest rates for debt consolidation are often lower than licensed lenders’. Banks usually charge 3.5-11% in interest per annum, while licensed money lenders charge 1-4% a month (up to 48% per annum).
Licensed money lenders may have more flexible eligibility requirements but they are still obliged by law to maintain certain limits.
These are the factors that affect eligibility:
The larger the outstanding amount of all your payday loans, the less likely your consolidation loan application might be approved
Dealing with a large number of creditors is complicated and the bigger the number, the lower the chances of approval.
Borrowers with a history of repeatedly not honouring their debts pose a high risk and their loan applications are less likely to be approved.
Are you struggling to manage too many payday loan repayment deadlines or are even on the verge of bankruptcy? Don’t lose hope – taking a payday debt consolidation loan can potentially help you.
CompareSing is a loan comparison site that shows you all your options from licensed money lenders, so you can compare interest rates and other loan terms, and choose one that is most suitable for you.