Payday loans are the worst loans that you can have as personal debt due to the exorbitantly high interest rates that are added weekly. This page will give you a few ideas on how to consolidate payday loans and hopefully get out of that debt.

Many households carry a reasonable amount of debt. That means their debt to income ratio is well within their ability to pay. Unfortunately, the households that carry larger amounts of debt are often the ones that can least afford it. Their debt ratio far exceeds their income ratio. For households like this, it is not uncommon to see an average of $8,000 or more of credit card debt. http://moneycentral.msn.com/content/Banking/creditcardsmarts/P74808.asp

What Are Payday Loans?

Payday loans are the worst type of loan that you can take out and can be considered bad credit loans most likely because people with bad credit are the ones most likely to need one. All that is required to take out a payday loan is a bank account in good standing and a regular source of income. To get the loan, you give the lender a check in the amount of the loan plus interest. Some lenders will take the electronic information to your bank account. The loan is to be repaid on your next payday.http://www.paydayloaninfo.org/facts.asp At this point, one of three things can happen:

1. the loan can be paid in full with the interest in cash and be done
2. the lender can deposit the check (written in the amount of the loan and the interest) and be done
3. the borrower can pay just the interest and let the amount of the loan roll over

Payday Loan Interest Rates

Payday loans are the worst cash advances to take out because of the extremely high interest rates charged in states that have no maximum interest rate caps. The high interest rates also mean that they are an easy source of fast cash for people who feel they have no other alternative for a quick loan. Payday loans should be avoided at all cost because they often turn into an endless cycle of debt.

1. Average payday loan amount can be between $100 and $1000 depending on the limits placed by the state.
2. The average interest rate is about 650% APR or more.http://www.paydayloaninfo.org/facts.asp
3. You can expect to pay $30 per $100. The terms will vary with the length of the loan with shorter loans having higher APR. (So a $300 loan will cost $90). http://www.paydayloaninfo.org/facts.asp
4. Payday loans often self renew for another pay cycle with no decrease in principle. http://usgovinfo.about.com/od/consumerawareness/a/paydayloans.htm
5. Some states have enacted legislation to cap payday interest rates, but other states have no cap.http://www.paydayloaninfo.org/legal.asp States with no caps include Delaware, Idaho, Nevada, South Dakota, Utah, and Wisconsin. Other states vary in how much interest they will allow payday lenders to charge.

The trouble starts when you fail to pay back the short term loan and roll it into the next pay check, and so on.

Should you use professional Debt Consolidators?

With a little work, you can fix your debt problems on your own. Debt consolidators are companies that make money by charging you fees for supposedly restructuring your debt. Sometimes your credit can even end up worse than before. Debt consolidation loans get you lower monthly payments by extending how long you pay on the loan. By doing this, you make your credit score worse and increase how much you are paying back.

What can you do to help yourself? There are a few simple steps to help you learn how to consolidate payday loans. While the steps are simple they will not necessarily be easy and may take some time to work through. http://moneycentral.msn.com/content/Savinganddebt/Managedebt/P36230.asp

Debt is the result of overspending and lack of saving. Debt is a problem, but it is really the symptom of a deeper problem, poor money habits.

If you are taking out payday loans then you probably have other outstanding debt that needs to be addressed as well. Figure out where all of your money is going by writing up a budget that includes all of the income you receive and all of the bills you need to pay.

Write down all of your debt with the highest interest first. This will most likely be your payday loan or loans if you have multiple. You can use a paper and pencil to figure this out or there are many online debt evaluation calculators that can help you figure out exactly how much you owe. This list of outstanding debt will tell you what bills need to be paid first.

If this seems difficult for you, then there are a few nonprofit consumer groups that help consumers nationwide that help people who want to get out of debt:

1. Contact Consumer Credit Counseling Services (CCCS) or
2. the National Foundation for Credit Counseling (NFCC) for help.

An important part of creating a budget is learning to prioritize your debt. Poor money management or an emergency of some kind forced you to take a fast loan. It will take some time but you can dig yourself out.

Liz Pulliam Weston from MSN Money has a list of money priorities for the average consumer. http://articles.moneycentral.msn.com/SavingandDebt/ManageDebt/the-9-step-guide-to-your-finances.aspx

Where should the money go?

1. Pay your bills – rent or mortgage, utilities, car loan, and any insurance premiums (car, health, home or renter, life or term)
2. Create an emergency fund of at least $500. Even taking as little as $10 a week or a month and setting it aside will help. This type of fund for the future will prevent you from having to take a payday loan.
3. Pay off toxic debt like your payday loan or loans.

After these few money priorities are working, then you can visit Liz Pulliam Weston's list for secondary priorities.

Consolidation may be an option if you have the ability to get the credit lines needed. However, it must be stressed that moving debt around without changing the underlying patterns that caused the debt to begin with, will have little effect.

How to consolidate:

If you have equity in your home, you can take out a secured debt consolidation loan or a home equity loan. This uses your house as collateral on a loan, which makes it a secured debt rather than the payday loan unsecured debt. Keep in mind though that transferring debt to your house means that if you wind up defaulting on the loan, you can lose your house. http://www.bills.com/blog/consolidate-payday-loan/

If you qualify, you can try for the low interest credit transfer rates that credit cards offer to move previous balances. Again, there are a few pitfalls. First you have to qualify. Second, some credit card consolidations will not allow you to roll payday loans into them. Third, these introductory 0.0 APR offers do not last long. You will then have to move the money again or pay a much higher interest rate. The benefit to this is that the interest rate will never reach that of payday loans. Also, if you wind up defaulting on a credit card loan, it will damage your credit score but you will not lose your home. http://moneycentral.msn.com/content/Savinganddebt/Managedebt/P36230.asp

You might be able to use a cash advance from your credit card to pay off the payday loan. While credit card cash advances have very high interest rates, payday loans are higher. If you then have problems paying your credit cards, your debt will grow slower than with payday loans and credit card companies have laws which govern their repayment tactics as well.

Another way is to borrow from your retirement savings. Again, this is not overly advisable because losing money in your retirement savings is difficult to recover from. If you lose money from your retirement savings, it will be difficult to live later on when you are earning less money than now.

You can talk to your personal bank or credit union about personal loans, refinancing existing loans such as car loans.

If you can't consolidate your payday loan debt you must begin to chip away at it a bit at a time or you will never break out of the payment cycle.

Payday loan companies will try to use scare tactics to get you to pay. All states have laws about what these lenders can and cannot do. You must check your state laws to know your rights, especially if the loan people start to harass you, threaten you, or come to your house. Do not give them access to your bank account information. If you have done this, you should probably close the account.

Payday loans must be paid back as soon as possible if used, or better yet, don’t use them at all.