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Payday loan debt traps millions of people every year. Within just a few months, even a small debt can become unmanageable due to high interest rates and fees.

The average interest rate of a payday loan is around 391%. That’s just the average: some companies charge a rate of up to 500%. That is considerable, and unpayable for most borrowers.

So what happens? Borrowers’ bank accounts are wiped out, and they’re hit with overdraft fees. They get into increasing financial trouble. They don’t have the money to pay their regular expenses, much less make a payment on their payday loans.

It’s a grim situation. But with payday loan consolidation, there is a way out.

How does payday loan consolidation work?

Payday loan consolidation is useful when you have unsecured lines of credit like online and storefront payday loans?Here’s how that works.

Once you find the payday loan consolidation company you want to work with, they will help you work out a payment plan you can afford. During that process, the consolidator works closely with your lenders to bring down the interest rates and seek to have your additional fees and extra charges waived. At the same time, most consolidators will offer you free counseling to help you evaluate your current financial situation and help you improve it.

This form of debt relief works best when you’re struggling to pay high-interest payday loans even after making your best efforts. By helping you pay off cash advance load, payday loan consolidation helps you get control of your finances - and your life - again.

When should you get payday loan debt assistance?

  • When you want to eliminate loans with high APRs
  • When you want to protect your paycheck from payday lenders and collectors
  • When you’re in financial crisis due to excessive payday loan debt
How much can we save you?
Enter a monthly payment you can afford to find out.
$
.00

How much will you have to pay every month?

The amount of your new monthly payment will depend on:

Your lenders’ willingness to reduce interest rates
How many outstanding loans you have
The amount you can afford to pay

The pros and cons of payday loan debt consolidation

Pros
  • No advance fees
  • No high interest rates
  • No late fees
  • No extra fees
  • No automatic debits
  • Fewer collection calls
  • Lower risk of getting sued
  • Just one pocket friendly payment a month
Cons
  • Need to avoid taking future payday loans
  • Need to follow the consolidator’s plan
  • In the case of secured loans, your collateral may be at risk

Why a consolidation program is the best payday loan debt solution

There are two main ways to get payday loan relief.

1

A Consolidation program

This payday loan debt relief option gives you the ability to make a single, affordable monthly payment. You lower your costs while eliminating the need to manage multiple payday loans or use assets as collateral. It’s a wise choice for getting control of your debt.
2

A Consolidation loan

This option requires you to put up collateral to get the best rates. If you don’t want to put up collateral, or don’t have it to put up, you will pay higher interest rates. It is generally not a good choice for getting control of your debt.

Compare Payday Loan Debt Settlement, Consolidation Program & Loan

Compare Your Payday Loan Relief Options: Debt Settlement, Consolidation or Loan?

Comparison Payday loan debt settlement Payday loan debt consolidation program Payday loan debt consolidation loan
What it does Reduces your loan’s payoff amount Lowers your loan’s interest rate and monthly payment Transfers your debt to another lender
Payoff term 2-4 years 2-5 years 1 -30 yrs
Mode of payment lump-sum payment monthly payment monthly payment
Requirements Sufficient savings to make the payment Make monthly payments Collateral
Credit score Drops initially but improves over time Gradually improves Gradually improves
Is this the best way to get out of payday loan debt? This way is best when you are able to pay off multiple payday loans with one lump sum payment. This way is best when you can afford a single lower monthly payment. This way can be a good option when you have collateral and are confident you won’t lose it.

How can OVLG give you the best payday loan debt assistance available?

OVLG provides payday loan debt assistance in the following ways:

  1. 1 OVLG’s financial coaches will explain the payday loan consolidation process, the fee structure that goes with it, and the No Result Refund Policy.
  2. 2 The financial coach will address any questions you have about clearing payday loan debts, and ask if you want to become a client only when you have cleared up any doubts.
  3. 3 The Client Relationship Associate (CRA) will collect the information they need to start the process, including your name, the lender’s name, the date the loan was made, the loan’s terms, the mode of payment, the amount you have paid so far, and the loan’s outstanding balance.
  4. 4 The CRA will analyze your payday loan debt problems to the last detail, and will determine if your loans are even legal.
  5. 5 If your loans are legal, the CRA will determine the maximum interest you need to pay. And if the loans are illegal, you will be entitled to pay only the principal amount.

Learn more about payday loan assistance

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* Client names have been changed to protect privacy

Five lifestyle changes for getting out of payday loan debt

  1. 1 Create a monthly budget that works for your financial situation. Cut expenses where you can.
  2. 2 Downsize to just one vehicle or a smaller home to free up some cash.
  3. 3 Use your free time to make more money and pay off your payday loan debts as quickly as possible.
  4. 4 Lead a frugal life so that you earn more than you spend.
  5. 5 Get a roommate to help you share your household expenses and free up cash to pay off your payday loan debts.

The best payday loan debt advice for you

The best payday loan debt advice for anyone is to never get one. They are expensive loans, which makes it easy to get in over your head, quickly. If you need money, look for alternative lending sources like:

  1. Friends and family.
  2. A personal loan from a credit union.
  3. A personal loan from a bank.

Even credit cards are usually a better deal than a payday loan if you can get them.

Can you go to jail over payday loans?

Neither authorized payday loan lenders nor illegal lenders can send you to jail when you don’t make a payment. However, authorized lenders can sue you in court. There is a risk of a default judgment when you lose the case, which means that you could have wages garnished or liens placed against future earnings.

CFPB: Proposed laws to end payday loan debt traps and save borrowers

The consumer watchdog Consumer Financial Protection Bureau (CFPB) has proposed new rules in March 2015 to bring an end to payday loan debt traps. The proposed rules aim to save consumers from debt traps mainly in 2 ways - prevention and protection.

Proposed rules:
  1. Lenders have to verify if borrowers can pay off the loan along with interest, fees and principal amount.
  2. Lenders need to check the borrower's’ income, financial liabilities and borrowing history.
  3. There has to be a 60-day cooling off period between payday loans.
  4. Lenders can issue the second pdl within 2 months when borrower’s financial situation has improved.
  5. Once a lender issues 3 consecutive loans to a borrower, he can’t issue a new loan in the next 60 days.
  6. Lenders need to offer reasonable payment plans to borrowers for getting out of payday loan debt.
  7. Payday loan lenders can’t keep borrowers in debt for more than 3 months in a year.
  8. Maximum 2-3 rollovers would be allowed followed by a compulsory 60-day cooling-off period.
  9. Lenders need to suggest a way out of debt before offering second and third loans in a row.
  10. The way out of debt will include: (a) the principal will drop with each loan (b) the lender would offer “off-ramp” for the third loan so that it could be paid off without extra fees.

4 important tips to know before you consolidate your payday loans online

If you want to use an online payday loan consolidation option, then make sure to do your due diligence on the provider. Make sure:

  • 1 The company has a valid physical address
  • 2 The company has good online reviews
  • 3 The company has a budget-friendly fee structure
  • 4You understand the payday loan laws of your state

How to pay off payday loans in installments

Payday loans are short-term loans designed to be paid off your next paycheck. The full amount of the loan becomes due just two to three weeks after the loan is issued. Most people end up making a partial payment, then take out a new payday loan for the balance of their old one. But sometimes, even the most responsible borrowers face a situation where they can’t pay the amount due on the due date, and they cannot secure a new loan to cover the difference.

If you can’t pay on time, you’re facing a big hurdle. You may start receiving calls from debt collectors. And your outstanding balance will begin to skyrocket due to the very high-interest rate that’s common to almost all payday loans.

So what’s the solution?

An Extended Payment Plan, or EPP.

An EPP will help you pay off the outstanding balance on your payday loans in four equal installments - without added fees or interest.

Under an EPP, if your payday loan company is a member of the Community Financial Services Association of America (CFSA)

  • Compel you to repay the loans
  • Threaten or force you to make immediate payments
  • Charge you additional fees for the extended payment option

They will be required to give you your next four paydays to pay them back.

If you have taken a loan from a CFSA member, then you can ask for the EPP. After you submit your application, you’ll get a new statement detailing your modified loan agreement, which will tell you the amount of the four equal payments you will need to make over the next four paydays. There will be no new fees or interest charged for these new terms.

You can make payments in cash, or you can use the ACH debit option to have the payments withdrawn automatically from your account on payday. It’s up to you. Either way, you need to inform the lender when you set up the EPP. Most lenders won’t allow you to change the payment method after you have signed the new agreement.

Carefully read the information on the payday loan lender’s website. There should be a CFSA logo there.

If the company has a physical address, then it may be better to go in and look for the blue oval logo yourself. It should be on display somewhere prominently in their office.

If the CFSA member agency doesn’t agree to give you an Extended Payment Plan, you can call 888-572-9329 between 9 and 5 Eastern time. That’s the CFSA hotline number. You can also register a complaint at the CFSA website.

Under federal law, you can apply for an EPP with each payday lender once per year. No more than that. However, your state laws vary on this, so you should definitely check the laws in your state. The lender will be obligated to follow the law in your state.

Also, remember that you can’t take out another payday loan until you have paid off the entire amount due on your EPP.

The consequences for failing to pay off your EPP loan can be severe. Your lender may be able to charge you an additional EPP fee, along with other charges and penalties. The lender can increase the amount of the payment you must make each pay period. They can sue you for principal, interest, and penalties. In short, it can be a ruinous financial disaster that you should make every effort to avoid. Before entering into an EPP, be certain that you can make the payments, and make them on time, every time they’re due.

Video Transcript: Payday Loan Consolidation: How it helps you to pay off debt

Are you paying high-interest on payday loans? Would you like to get rid of your debts and save money? If so, then payday loan consolidation is exactly what you need.

The first thing to do is to find a trustworthy consolidation company, and if it’s a law firm, that’s really good.

Next, you have to attend a session with a debt counselor and decide if you want to join a payday loan consolidation program.

You will need to share important details with your counselor. Details such as:

  • 1. Name of your state
  • 2. The name of the payday loan company
  • 3. When you took out the loan
  • 4. The principal amount, fees, and interest rates
  • 5. Payment method
  • 6. The amount paid to date
  • 7. And, the current amount claimed by the lender

Afterward, the company will ask its attorney to check if the lender is licensed in your state.

Now, if the loan is illegal, the consolidation company will arrange it so that you only have to pay the principal amount.

And, if it is legal, the company will negotiate with the lenders to reduce interest rates and to arrange an affordable repayment plan for you.

By
(Principal Attorney)
Rocklin, California
Updated On May 27, 2021

Mr. Solomon has significant hands on skill and expertise in legal research and writing and extensive litigation experience. He has been licensed with the state bar of California since 2003. He graduated from University of the Pacific, McGeorge School of Law, Sacramento, California in 1998 and currently works in Rocklin, California.

Last Updated on: Thu, 27 May 2021