When Should You Consolidate Your Personal Loans

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Paying back multiple loans can become a hassle. Whether they are larger loans, like a personal, unsecured loan, or a smaller loan, like payday loans, it is difficult to manage payments at times. By consolidating your loans into one, easy monthly payment, you can improve your credit and save money.

Personal Loans versus Payday Loans

A personal loan is a large sum of money that you obtain from a bank or other lender. These are often unsecured, meaning that the borrower is not required to put up any collateral as security for the loan. Because of the lack of security, personal loans often assess high interest rates. In addition to paying unreasonable interest rates, borrowers often find themselves paying back the loan over a large period of time. When one has several personal loans to repay, the high interest rates and long payback period can become less and less affordable for the borrower.

Payday loans are different from personal loans, but can be even more difficult to pay back. A payday loan is a small amount of money, usually less than or equal to the borrowers weekly wages. When an individual is short money and needs an advance, they often attempt to make ends meet by acquiring this short term loan. Instead of putting up collateral, the borrower issues the lender a postdated check. The amount of the check is equal to the amount of the borrower’s anticipated pay in the coming week, plus a hefty interest. This interest rate, when adjusted to an APR, is often 200% to 300% of the loan amount. By the end of the loan period, which is usually two weeks long, the borrower must pay back the loan. If he or she fails to do so, the lender may cash the post dated check. Most problems arise when the check is deposited and the borrower does not have adequate funds in his or her checking account. Further fees are then assessed, and interest is applied to those as well.

This form of debt is particularly devastating. Fortunately, it is possible to repair the damages to one’s credit by managing their debt with payday loan consolidation companies.

Debt Consolidation

When the responsibility of repaying your loans becomes too much to handle, it is time to consider loan consolidation. Payday loan consolidation and personal loan consolidation can be done separately or together, but it is in your best interest to consolidate all your loans into one lump sum. It is unwise to pay off only some loans and default on the others. When you consolidate your debt, your loans will essentially become one, controllable loan.

When you consolidate, a bank or lending entity will buy all of your loans. They will repay each of them in full. You will then repay this company for taking over your debt. You will have only one interest rate, one payback period, and one payment. The monthly payment and interest rate will be assessed according to the interest rate, your income, credit, and other factors, but will most likely be less then what you paid prior to consolidation. Also, whatever improvements you have made to your credit since you were approved for the initial loans will reflect in this amount.


Payday loan debt consolidation simplifies the debt repayment process and is less expensive than repaying all your loans separately. This is not its only tribute, however. Consolidating your debt will ultimately lead to your ability to manage your finances in a more responsible manner, and assist you as you pursue a debt free life. If you consolidate your debt, you will find that debt repayment is not an impossible task.

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