Tips on How to Consolidate Your Short Term Loans

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Debt consolidation is a tried and tested financial strategy that has helped countless people just like you regain control of their expenses and their lives. It can be used to rein in high-interest debts such as short term cash loans.

Short term loans are unlike almost any other loan. Instead of being repaid in instalments over time, these short term cash loans are repaid in total at one go. Ordinarily, this fewer-payment approach does not work with debt consolidation, which is more of a long-term strategy. However, it is a good alternative if you have taken out several short term loans at once.

In this case, you should consider these 4 steps to improve your financial health. The aim is to help you pay less through a lower interest rate and better contract terms. If you have already defaulted on your short term loans and are struggling to keep up with the fees and penalties, use these strategies immediately.

Step 1 – Compare interest rates

The first step is to identify where you are bleeding the most money. This means comparing not just the stated interest rates from the different lenders but the fees and penalties for late payment from each one as well.

Some short term cash loans contracts are structured so that they seem to have a low interest rate at first glance. However, read the fine print and you will discover that the total amount collected in late penalties adds up to more than the interest.

This step can be confusing, especially if you have borrowed different amounts from different lenders with different rates and fees. A simple solution is to plug all the data into an Excel sheet and have the program do the hard work for you.

Step 2 – Find out balance transfer costs

A short term loan contract is an agreement between you and the loan company to receive money on a set date and pay it back by another set date. When you fail to uphold your end of the bargain by defaulting on a payment, the company is forced to allocate additional time and resources to your case.

It is the same when you attempt to consolidate a short term loan from one company to another. Because of the admin requirements of labour and time, lenders will add an extra fee to all balance transfers.

Add this calculation to your Excel sheet for a true picture of the cost of consolidation. You will now have an accurate idea of which balance to transfer to which creditor. Obviously, you will choose the one that lets you pay the lowest amount.

Step 3 – Speak to your creditors

Now that you have all this financial information collated in one spot, it is time to take the first real step to a debt-free life. Visit each of your creditors with the paperwork and show them what the cost of maintaining your debt is.

This step serves two purposes. First, it gives them a true picture of your financial hardship. This short term loan comparison shows that you intend to honour your debts but are struggling under the current circumstances. 

Secondly, it gives them the opportunity to adjust their terms. Most licensed moneylenders will be able to adjust minor fees and interest rates if the situation warrants it. You could come out of the meeting with a lower interest rate than when you started.

Step 4 – Meet your obligations

Once you and your creditors have decided on a debt consolidation plan, do not deviate! Most good licensed moneylenders are willing to give you some room for delays but if you repeat the same mistakes, they may resort to legal action. Bankruptcy proceedings will devastate your credit for years to come.

Avoid this by creating a reasonable budget and sticking to it. Limit your credit card spending and cancel those that charge high interest as well as those you do not need. 

Prevention is better than cure

The best advice for dealing with debt consolidation for short term loans is to borrow responsibly in the first place. Only take a short term loan if you have the discipline to control your spending before payday arrives. If not, you are digging yourself into a hole that leads straight to bankruptcy.

Some reasonable alternatives to payday loans are casual loans from family and friends and low-interest or zero interest credit cards. Use short term loan comparison sites to see where you can get the best deal.