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How Does Payday Loan Consolidation Work?

How Does Payday Loan Consolidation Work

Taking loans from different banks and microfinance institutions, we run the risk of getting confused in them. In addition, it is always easier and more pleasant to deal with one debt than with several ones. Faced with the problem of paying off numerous loans, you can combine them into one. Consolidation of loans is a complex, responsible and still uncommon procedure, which, however, can significantly simplify the life of the borrower.

What is debt consolidation?

If we interpret this concept literally, then consolidation is the process of combining several loan obligations into one. But in fact, this procedure is not as simple as it seems. To do this, you need to collect all the data on debts together, find a lender who agrees to pay everything and provide a new loan on favorable terms.

Some readers will notice that the consolidation procedure has something to do with refinancing, and they will be right. The difference is that refinancing involves changing the lender for one obligation, while consolidation can help close several debt lines at once in different financial institutions.

Is it possible to consolidate payday loans?

Debt consolidation in Oregon is most commonly associated with banks. Indeed, many banks offer the services of pooling all the borrower’s current liabilities.

There is both full and partial consolidation – you only consolidate those debts that cause you the most concern. But you should understad that the procedure for consolidating bank loans is not a simple operation, and not every bank undertakes it. As a rule, such things are discussed with banking specialists and a strategy is worked out for each specific situation.

The situation is different in the microfinance sector. Due to its specificity, the huge variability in loan processing methods, payment terms and interest rates, combining several payday loans into one is sometimes a very difficult task.

Preparing for debt consolidation in Oregon

Before agreeing to an offer to consolidate debts, the borrower needs to carefully prepare. The thoughtless use of banking services can significantly worsen the financial situation.

Borrowers are advised to:

  • Evaluate the change in financial burden indicators due to the consolidation of debts. The data obtained as a result of the calculations must be compared with information on the total costs that will arise without combining loans. Sometimes it is more profitable to repay several loans, for example, if the validity period of one of the transactions is nearing its end.
  • If there are several offers from different financial institutions, choose the most advantageous option, taking into account the loan amount, interest rates, the term and date of making monthly payments. Particular attention should be paid to additional services and conditions for imposing penalties.
  • Make sure that the chosen consolidation option is not only cost-effective but also affordable in terms of processing speed, collection of documents, additional fees and quality of service.
  • Clarify the list of required documents with the financial institution, and then collect them as soon as possible. The deadlines for submitting documents will have to be clarified on the website or with bank employees.

The decision to combine loans should be made taking into account financial possibilities and based on information about the current financial situation. In order not to get into an even deeper debt hole, you need to think about the risks that you will face after consolidation.

Before applying for a debt consolidation loan, please consider:

  • Consolidation feasibility. A new loan should be more profitable than previous loans.
  • Collateral requirements (if any).
  • Loans conditions, in particular rates, fees, commissions and monthly payments.
  • Information about the bank and the debt consolidation program chosen by the borrower.
  • The amount of additional fees in case the consolidation option is paid.

You should also study the reviews and check the reliability ratings of the lender.

Important! It is better not to contact organizations that have a lot of negative reviews from experts and consumers. Authoritative financial institutions should be involved in cooperation.

How to combine payday loans into one: instructions

Having completed the preparatory work, the borrower can proceed directly to the consolidation. The procedure begins with the submission of an application based on the model of the selected lender. The application must include passport data, information about existing loans and a phone number for feedback. Some lenders also ask you to justify the reason for applying for help.

Standard consolidation algorithm:

  1. Search for a profitable loan product, study conditions and prepare for drawing up an application;
  2. Submit an application and the required documents;
  3. Wait for the lender’s decision and get the instructions on the further actions;
  4. Coordinate all the nuances of the transaction and sign a debt consolidation agreement;
  5. Get funds from a new creditor to pay off previous debts.

Debt consolidation steps may vary depending on the bank and the type of procedure chosen. For example, in the case of using colateral, you will have to provide information about the property chosen to secure the transaction. In any case, with a debt consolidation, the debtor will be forced to repay one large loan instead of several small loans.

Will payday loan consolidation hurt my credit?

While a payday loan typically doesn’t show on your credit report, a payday consolidation loan typically does. Depending on how you manage the debt consolidation loan, it can both help you improve yor credit or hurt it.

Reasons for debt consolidation loan rejection.

Common reasons for debt consolidation loan rejection are:

  • Low income;
  • Age restrictions;
  • Bad credit history;
  • Misleading the creditor;
  • Errors when filling out the application;
  • Reconsolidation of loans.

To increase the likelihood of approval, you should pay attention to the loan rejection reasons given above. As a rule, applications are rejected due to typographical errors or non-compliance with the requirements of the lender. As soon as the borrower corrects the errors, the application can be submitted again.

Important! You may be declined for a debt consolidation loan of you have previously refinanced or restructured loans under the agreement. A good reason for rejecting a request is also the concealment of information important to the creditor.

Pros and cons of debt consolidation in Oregon

Properly executed consolidation of loans will reduce the payment burden on the borrower. The procedure can simplify the process of repaying loans and change the terms to more favorable ones, which reduces the likelihood of late payments. The final loan repayment will increase the borrower’s credit score.

Consolidation Benefits:

  • It is easier to make monthly payments on time within a single loan than to meet the obligations of several loans at the same time.
  • Using the option to reduce monthly payments, a client with a small income can significantly reduce recurring expenses.
  • The interest rate on a consolidated loan is lower than the total monthly payments on small loans.
  • Exemption from past obligations of the borrower in some cases is accompanied by a partial write-off of debts.
  • Reducing the total loan cost will help to avoid late payments, while maintaining an impeccable reputation.

Debt consolidation entails both positive and undesirable consequences. To reduce the risk of force majeure caused by inappropriate combination of loans, you should calculate future costs carefully, taking into account even the smallest nuances of the procedure.

Consolidation Disadvantages:

  • Calculating the potential benefit or possible loss from debt consolidation requires skill.
  • Negotiating with the creditor and collecting the required documents takes time.
  • Borrowers face associated costs, such as the need to pay for various certificates.
  • There is a risk of fraud and default by unscrupulous intermediary companies.

It should be noted that the funds in the course of consolidation are not issued to the borrower in cash. The bank transfers the agreed amount to the accounts of former creditors in order to avoid fraud on the part of customers. In turn, the loan agreement does not provide for the payment of compensation for early fulfillment of obligations.

Important! Former creditors are not entitled to penalize borrowers who decide to consolidate debts. By law, creditors are prohibited from preventing the early closure of transactions.


Any change in the terms of the original loan entails risks. Debt consolidation is no exception. However, a well-executed consolidation of loans will allow you to find a real way out of a difficult financial situation. The predominance of advantages over disadvantages contributes to the growth in popularity of this banking service among the residents of Oregon. Debt consolidation will allow borrowers to get rid of problematic obligations with minimal losses and maintaining an impeccable reputation.