Do Not Use Payday Loans for Debt Consolidation – Do This or That Instead

When I started Loan Camel, I did it to help people avoid some of the mistakes I made by sharing my experiences and presenting alternatives and miscellaneous solutions to a variety of financial challenges we can come across in life. I do so without judgment because I know what it’s like to feel the burden of the financial world and I know that regardless, I was the same good person inside, rich or not so rich… and believe me, using payday loans for debt consolidation will not remotely help get you to the plus side of rich.

I live by the creed of do the right things for the right reasons. The right thing is to help people best overcome challenges with debts and money. The right reasons are based in wanting to help people succeed where I failed and re-failed before I learned how to succeed. I suffered so you don’t have to. Now I’m helping people over the hump – proudly.

I made both, a conscious and a conscientious decision to never promote any products which I do not believe are helpful, let alone harmful. For me, when I first thought about what is harmful, payday loans are what came to mind. And for Debt consolidation, they’re really an awful solution… but I’ll get to that. I literally just removed a lender from promotion here on Loan Camel as a “bad credit personal loan” option because I saw that their company offers payday loans, in addition to ordinary personal loans, and I do not want my people going near a payday loan. On top of it, if they are promoting payday loans then they are philosophically not in alignment with Loan Camel’s values and mission.

What’s Your Problem, Dude? Oh, Bills Galore – We Got It, We Got You!

As you know if you have read the Loan Camel’s “About Us” page, Daddy Poorbucks has personally been in credit card debt hell, even in a Chapter 13 bankruptcy, brought on mostly by an expensive divorce and a lack of understanding of all of my options. Debt can be a killer, emotionally, financially and even take its physical toll… especially when you see no way out.

Personally, I have transferred balances between credit cards, opened new cards at 0% interest on parked and paid down debt and of course, used personal loans to move and pay down then pay off credit card debt. The thing to understand is that, for whatever reason you got into debt, you have to stop the bleeding. That you are here trying to figure a way out is an important 1st step.

An important 3rd step will be learning to love your debit card. That means feeling the power of relying on what you can afford as best you can. That is an important part of your long term solution because moving debt from one vehicle to another is a way to stop the bleeding but it isn’t a real debt pay-off. It’s an interim move to pay-off the debt. If you keep spending on your cards you will simply end up with more debt. So budgeting and living within your means are necessary parts of the overall solution.

Wait, what happened to the 2nd step? Did I pull an ADHD move and go from A to Z without any letters in between? And don’t get sensitive about ADHD, I’m a proud member of the club. So step 2 is where you stop the bleeding by going from revolving debt to paying off debt by a date certain. This can be a very interim balance transfer into a 0% interest rate credit card, if you are disciplined enough to pay down the debt, or some portion of it that way, or more likely, especially if you have credit score challenges, taking out a personal loan to consolidate your debts and pay them off in defined installments.

And see this is why using payday loans for debt consolidation is a fail on every level. They are marketed as a short term debt solution and you are dealing with a long term debt problem. Additionally, they can accelerate into rates of effectively 100’s of percent interest on a per year basis and put you in a real hole. If you know the song White Lines by Grandmaster Flash – Don’t do it!

Payday Loans Can Be Vicious.

I see payday loans as predatory practices where people desperate for financial assistance are taken advantage of and then owned by these assholes. Payday loans are short term cash advances at very high interest rates intended to bridge the gap between the time of taking the loan and your next paycheck. They are set up in a way that they circumvent usury laws and are generally for smaller amounts of money, like $100.00 – $5,000.00, depending on the state.

So you borrow $1,000.00 at $15.00 – $18.00 per thousand, and when you get your next paycheck, in 2 weeks, you pay back close to $1,200.00. For one, that works out to an annualized rate of 400 – 500%. Second, and the bigger problem, is that people find themselves short of money again when their next paycheck comes so they start rolling the loans over into new loans with additional fees and then it snowballs. Next thing you know, to quote Kool Moe Dee in the song Let’s Go, a late 80’s LL Cool J diss track, they’ve “got a lock on my jock like a pit bull”. And then when you fail to pay, the debt builds and the tactics to collect are notoriously aggressive.

There is no reason to use one of these loans, especially for debt consolidation. According to a Study on Payday Lending by the Consumer Financial Protection Bureau, 64% of all new borrowers renew their payday loans. So if you think I’m simply trying to scare you – Damn right I am… and with good reason. Don’t be a victim and another statistic. You need to tell them to F-CK OFF… at least figuratively.

So what options are out there???

You Can Do This: Pick a Card, (Almost) Any Card…

I used to call this credit card bingo but it’s really more like a credit card she’ll game. You bounce your debt from card to card by moving it to low or no interest rate cards and you pay it down monthly at the most payment you can afford, per month until it is all gone. This was the very first way I paid down debt and it can work but it requires discipline. Aside from not spending more on your credit cards, you must make monthly payments in sizable chunks to pay it down.

Know that if you are taking out new cards that this can help your credit as you have a lower debt utilization rate after adding the new card but your average age of credit will take a hit. Also be aware of minimum fees charged on transfers as well. When your initial low APR rate on transfers is nearing an end you can then transfer the loan to another card, hopefully one you already have, at a low rate and continue that way or you can then do a personal loan if you are running out of credit card options for balance transfers.

How About A Nice, Normal Personal Loan Option – You Can Do That.

I’ve used multiple personal loans to pull myself out of debt, even after a Chapter 13 bankruptcy and now I see credit scores in the 800’s. I like using personal loans for credit card debt consolidation purposes as a finite means of stopping the bleeding and getting your financial life on the road to recovery. You’re playing with aces now… a much better deck of cards than the kind involving revolving credit.

Depending on your credit, the rates can be competitive or they can be high but if you are in need of stopping revolving debt from rolling you over, even at some of the higher rates, you can choose an extended term to pay off the loan. You will pay a fixed amount and you will pay it off by a date certain.

You set the payment amount and time period, usually 36 or 60 months, to be within your monthly budget. It is generally withdrawn as an automatic debit and not only will you pay your debt down each month but you will build credit as you pay it off. Be aware of the fees charged up front for the personal loan but you can roll those into the loan and after a short while you will be paying down debt and feeling the success. Remember, learn to love your debit card as well as you do not want to start building more debt. This is how I gained my financial freedom and this can help you like it helped me.

You can visit our Personal Loans page and check your rates without impact to credit and apply for loans as well. If you are in the higher credit score categories then we match you have the lenders most likely to approve you for the best rates based on your profile. In the lower score ranges, you are provided the options to examine as well, though you will be more limited in choice and rate competitiveness. Still, you may see several lenders also competing to assist you.

Don’t Be A Victim, You have Better Options.

So here’s where we are at. You are not going to a payday loan lender. Using payday loans to consolidate debt is insanity. Loan Camel does not refer readers to payday lenders or those who promote them and if you ever see otherwise, please let me know immediately.

If you can play the credit card she’ll game and move balances around as you pay them down then great. If you would like to stop the bleeding with a defined monthly payment and pay-off date then you can check rates without impacting your credit and apply for Personal Loans here.

And finally, do not continue to add debt to your credit cards. Set up a budget and use your debit card to stay within what you can afford. The more you use your debit card, while paying off your debt, the more empowered you become. You got this, baby! I did it and so can you.

If you have any questions or comments, please fee free to leave them in the space below and the Camel and I will respond.