What is meant by "payday loan consolidation"?


Quick Answer

The phrase "payday loan consolidation" means that a consumer with multiple loans has the option to combine these into a single one. This is often done by working with a payday loan consolidation company that pays off the consumer's payday loans. The consumer then pays one monthly payment to the payday consolidation company. This practice is very similar to debt consolidation.

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Full Answer

A payday loan consolidation company generally works with consumers who have poor to bad credit. These consumers may find it difficult to obtain a personal loan to pay off their payday loans. Turning to a payday loan consolidation company lowers their monthly payments and helps them pay off the loans sooner.

With payday loan consolidation, consumers submit information regarding what companies they have payday loans with, as well as how much they owe on each loan. The consolidation company can then work with payday lenders to possibly reduce interest rates and reduce the amount owed to each lender.

The consolidation company then pays off each payday loan, and the consumer sends payment directly to the consolidation company. Another option is for the consumer to pay the consolidation company, with the consolidation company then dividing the payments between the payday lenders.

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