Yes, it is possible for payday loans to be consolidated. This can help borrowers to avoid a negative cycle as it allows them to combine all their debts into one repayment plan which will normally involve lower interest rates and more manageable repayment terms.

According to Pew Charitable Trusts, approximately 12 million Amerians take out payday loans each year. Therefore, it is not surprising that some may struggle with their repayments and wish to consider payday loan consolidation. With this in mind, this guide presents a detailed overview on how you can go about consolidating your payday loan, as well as the advantages and disadvantages of doing so.


What Are Payday Loans?


A payday loan offers a fast and easy way to borrow money quickly. If you need a quick injection of cash and cannot wait until your next payday, they offer an easy solution that can help you stay financially afloat until you receive your upcoming paycheck. 

They are often used to pay for important or emergency expenses. Examples include to pay for medical bills, auto repairs, taxes, funeral costs, engagement rings, rent or utility bills.

To qualify for a payday loan, you need to be over the age of 18 years old, have a State ID or Driver’s License, and earn a reliable income of approximately $500-800 per month. You also need a live checking account for the funds to be deposited into.



Where Can I Get Payday Loans?


Payday loans can be accessed online via payday lenders or in physical payday loan stores. They are currently legal in 37 of the 50 US states which includes:

  • Alabama
  • Alaska
  • California
  • Colorado
  • Delaware
  • Florida
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maine
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Virginia
  • Washington
  • Wisconsin
  • Wyoming


What Happens If You Can’t Repay Back Your Payday Loan On Time?


Payday loans typically have very high interest rates and relatively short repayment terms which can sometimes make it more difficult to repay back, so it is essential to only borrow a payday loan if you are certain you can afford it. Missed payments can damage your credit score and lead to late fees and extra interest charges.

Many look to borrow a second payday loan to repay off the first or rollover their existing loan. However, this can lead to extra interest and charges which can become very costly and lead to a debt cycle. If this occurs and you are struggling to manage the payments, then you may wish to consider a payday loan consolidation.


What is Payday Loan Consolidation?


A payday loan consolidation involves combining multiple existing payday loans under one new loan, which you pay off regularly. This would mean that the borrower is only charged one single interest rate and fees, which would not only save money but be much easier to manage and keep on top of. However, this would only be the case if you chose a loan with an interest rate that was either less or the same as what you were paying before, and if you were able to meet the repayments on time.


How To Consolidate Payday Loans


1. Calculate Your Payday Loan Balance


The first step towards consolidating your payday loans is to add up your current debt across all loans. This way you can work out exactly how much you need, for instance you may want to borrow $600 or $700. This will allow you to reshape your debt into one more management repayment plan from a single lender.


2. Find A Loan At The Most Competitive Rate


Once you know the amount you need to pay off your debts, you should compare loan options from different lenders such as banks, credit unions or online lenders and apply with the lender most suited to your borrowing requirements. You could even seek payday loan debt advice such as Step Change as they may be able to offer you guidance on how to go about this based on your particular situation.


3. Receive Funds And Make Monthly Repayments


Once approved, a lump sum of money will be transferred to your bank account that you will use to pay off your payday lenders. You must get in touch with each lender to pay off any outstanding debts or some lenders may even repay your old creditors on your behalf. You will then make monthly repayments for your new loan until it has been paid off in full. Similar to individual loans, missed payments can result in late fees or if reported to the credit bureaus, could potentially damage your credit score.


What Are The Advantages And Disadvantages of Payday Loan Consolidation?


The pros and cons of payday loan consolidation are summarized in the table below:


Advantages Disadvantages
  • Merging multiple debts into one loan means less interest and administration fees which could lower your total borrowing cost
  • The eligibility criteria to qualify tends to be stricter than ordinary payday loans, which may be difficult for borrowers with bad credit
  • You will have lower monthly repayments which are more attainable
  • You may pay more in the long run due to extra interest payments from the longer loan term
  • If you pay it back on time you could potentially improve your credit score
  • If you fail to repay it back on time, you could damage your credit score
  • You will only have a single monthly payment which is easier to manage
  • There are normally minimum borrowing amounts that may be more than you need to cover the repayments of your payday debt; for instance some personal loans can only be taken out for a minimum of $1000


What Are Alternatives To Payday Loan Consolidation?


In the worst case of events, you could file for bankruptcy. You may be subject to a longer repayment plan or potentially even have your debts erased. However, bankruptcy comes with negative consequences as not only will it negatively impact your credit score, but it can make it more difficult to qualify for borrowing money, securing jobs, getting a cellphone or renting properties in the future.

With this in mind, there are many other alternatives that you can consider. Firstly, you should get in touch with the lender immediately to explain your extenuating circumstances and see if they will offer you a more flexible alternative repayment plan or freeze the interest on the loan. You can also speak to nonprofit organizations who can offer advice to those struggling with debt and evaluate the best option for you with a debt management plan (just bare in mind this type of plan could damage your credit score).

You could also consider borrowing money from family or friends, providing that you created a formalized agreement to ensure you paid them back. If you are a member of a credit union, there are payday alternative loans that offer small amounts of money at a lower cost and longer term. Local community organizations may offer food banks or emergency funds, or you could ask your employer for a salary advance if possible.

You could also look to sell unwanted items you no longer use to help gain a few extra dollars. Likewise, taking on a second job or a side hustle may help you to increase your income and reduce your debts.



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