Can Payday Loans Be Consolidated? Here’s How to Do It

From payday loans to credit card debt, most Americans owe money in one form or another.

In 2020, U.S. consumer debt hit $14.88 trillion, according to an Experian consumer debt study. Juggling multiple high-interest payments can leave many borrowers struggling to stay afloat. And payday loans are dangerous, short-term loans that can haunt borrowers for an extended period of time due to their enormously high interest rates that often leave borrowers trapped in a cycle of debt. To break free, borrowers might consider consolidating their loans to make payments more manageable.

Wouldn’t it be great if you could consolidate them into one single loan with one monthly payment? You can. Here’s how.

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How Does Payday Loan Consolidation Work?

Just like any other form of debt consolidation, payday loan borrowers will add up the total of the debts they need to consolidate, and look for one bigger loan to roll it all into one monthly payment.

Payday Loan Debt Consolidation Options

In theory, payday loan consolidation works. However, the problem lies in borrower creditworthiness.

Most people who fall victim to predatory lending often have trouble getting any other type of loan. Otherwise, they wouldn’t have turned to payday loans or title loans in the first place. But there are exceptions and if you need payday loan help, it’s worth figuring out if one of the following options applies to you.

Debt Consolidation Loans

The simplest way to consolidate your debts is through a debt consolidation loan. A debt consolidation loan is a personal loan you take out to pay off your various other high-interest debt. Typically you can get a lower interest rate when you do so and it can simplify your repayment plan by grouping everything onto one plate.

Benefits of Consolidation Loans

  • Lower interest rates: Just because it allows you to make a single payment doesn’t mean you should take out a debt consolidation loan. You should only take out a debt consolidation loan if the interest rates are lower than what you are currently paying with the payday loans. Additionally, you’ll want to make sure that there aren’t any hidden fees that make your effective annual percentage interest rate higher.
  • More legitimate lenders: When you take out a debt consolidation loan, you’re not dealing with some shady payday lender. Instead, you’re working with a bank or credit union that is probably more reputable. They actually care about your ability to repay, which is why a credit check is probably necessary to get one of these loans.
  • Predictable monthly payments: A consolidation loan usually is broken into monthly payments, rather than every payday. You only need to make a single payment, and to keep track of one bill.
  • No rollovers: One of the ways payday lenders get you is with rollovers. They allow you to easily roll over your balance into another term, still at a higher interest rate and usually with added fees. This isn’t the case with debt consolidation loans. If you want to extend it, you need to apply for a whole new loan. This will keep you disciplined and force you to make your full payments on time.

Are You Eligible for a Debt Consolidation Loan?

Ability to repay matters when it comes to debt consolidation loans. Don’t worry, they aren’t looking for a perfect credit score, but the lender will do a credit check and assess whether you have the ability to repay the loan.

Debt Consolidation Company

The other way to consolidate your payday loans is through a payday loan consolidation program. Also known as a payday relief program or debt settlement, this involves working with a firm that interacts with the payday lenders on your behalf.

A debt consolidation company will typically charge you on a monthly plan that’s less than the amount you owe. They will then negotiate with your payday lenders, in some cases reducing your debt load from them.

Benefits of Consolidation Programs

  • Lower total owed: Consolidation programs don’t require you to pay interest — just a monthly or biweekly payment. If you do work with a firm providing payday loan relief services, make sure that the amount you’re paying is less than what you’d have to pay the lenders.
  • Less work: With a debt consolidation loan, you need to handle the payments on your end. You need to make sure you take the new cash and pay the lenders. With a payday loan consolidation program, you don’t need to worry about that part. The firm handles all of it.
  • Professional advice: In addition to the money, a firm that provides payday relief services is available to help you with your financial situation. They’ll educate you on payday lending laws, offer personal finance advice, and help you with whatever you need.

Are You Eligible for a Payday Relief Program?

Payday loan consolidation/relief programs don’t do credit checks. But they will ask you for all of your loan documents. They know which lenders they can negotiate with to secure better terms — and which they cannot. Then, they’ll use this information to decide how much to charge you. You should never have to pay for a program upfront.

Typically a firm will only take you on if you have over $1,000 in debt.

More Options for Debt Relief

There are other financial services that exist for borrowers looking to consolidate their payday loans. Including:

Payday Alternative Loans (PALs)

Payday Alternative Loans (PALs) are short-term loans offered by credit unions. This makes them much more reliable, lower interest loan, because they are federally backed with a maximum interest rate of 28%. Loan terms are usually for 6 months with no rollovers to prevent borrowers from falling into a debt trap.

You can take out up to 3 PALs per year, but cannot have more than one out at the same time. There is a maximum of a $20 application fee. PALs do not require a credit check, but usually, you must be part of the credit union for a certain amount of time before you can apply for a PAL. PAL IIs, a slightly different variant of PALs, are offered at some credit unions and you can usually apply immediately upon joining the institution.

Personal Loans

Personal loans are installment loans that are taken out from anywhere from six months to several years, usually from a bank or credit union. Most personal loans are unsecured loans, which typically require a credit score of at least 600. There are secured personal loans for those with credit scores under 600. These require some sort of collateral — a car, or home, for example.

READ MORE: Best personal loan options

Credit Card Balance Transfer or Cash Advance

If you already have a credit card and you have enough available credit, a cash advance could offer you a quick way out. You can just electronically transfer money from your credit card account to your lender. A cash advance is quick, and credit card interest rates usually average below 35%, making them far less expensive than payday loans.

If you can qualify for a new credit card, you might be able to transfer your payday loan balance onto the new card. Often credit cards offer ‘teaser rates’, meaning you won’t have to pay any interest for a specific time period, though you will have to pay a fixed balance transfer fee that usually ranges between 3% to 5% of the total amount transferred. If your credit is good enough to qualify for a 0% introductory rate for 12 to 18 months, it can save you a significant amount of money.

Citi, Wells Fargo and Bank of America all offer multiple cards with introductory rates. Simply use the new card to pay off your payday loan balance, and then make your payments to the credit card issuer. This consolidates everything into one single payment. Consider setting up autopay so you don’t risk forgetting a payment and incurring a late fee. That could cause your interest rate to shoot up.

This may not work if you already have a lot of credit card debt, because some credit card issuers won’t allow you to transfer debt within different products from the same credit card company. And you’ll need to have good credit to qualify.

READ MORE: Best balance transfer credit cards

Home Equity Loans or Lines of Credit

Home equity loans and home equity lines of credit (HELOCs) are two ways to borrow against your home. If you own a home, borrowing against it will result in a much lower interest rate than a payday loan.

The difference between a home equity loan and a HELOC is that a home equity loan results in a one-time cash outlay. With a HELOC, you can borrow up to as much as you please.

READ MORE: What is a second mortgage?

Credit Counseling/Debt Management Plan

Another method you can try to get rid of your payday loans is credit counseling. By talking with a credit counselor, borrowers can set up a payment plan that works for their specific financial situation. You can often get a free consultation from a nonprofit credit counseling service near where you live.

Borrowers can also consider a debt management plan (DMP) to pay off their payday loans. Also sometimes called a debt management program, a DMP consolidates all of a borrower’s existing loans together into a single debt with a lower interest rate, making payments more manageable. Borrowers have to work directly with their lender to see if they’ll offer this option though. This can be a great way to repay your debt on your terms if they do.

Want to know more about debt consolidation? Check out this video:

What You Need to Know About Debt Consolidation

Debt consolidation is the strategy where you take out a new loan to pay off a collection of smaller loans. This groups together (or consolidates) the total amount of all of your previous loans so you can focus on repaying one single loan instead. Typically, loan terms are more favorable when you do this, resulting in lower interest rates, lower monthly payments or longer repayment terms.

While you may have the option of consolidating your loans, it usually only makes sense if you receive a lower interest rate. Be wary of consolidation companies that only offer lower loan payments or longer loan terms, as this can keep you in debt longer

What You Need to Know About Payday Loans

A traditional loan is issued by a bank or credit union. The borrower will go through a typical loan origination process, starting with an application that allows a lender to assess creditworthiness. In contrast, payday loans are short-term loans with high interest rates — often in excess of 600% APR — that are meant to be repaid by your next paycheck. In theory, they are to help borrowers, especially those with bad credit, in a time of financial need. However, in practice, payday lenders trap borrowers in payday loan cycles thanks to incredibly high annual percentage rates (APR) and multiple rollovers.

Loan amounts are typically around $500 with an initial repayment period of two weeks. But with high interest rates, borrowers often can’t pay the amount back, leading them to take out even more new loans. This payday loan trap can result in a $500 loan costing thousands of dollars instead.

Depending on where you live, state laws dictate whether payday loans are either outright illegal, legal with some restrictions (such as a capped APR), or have few if any, borrower protections. In some states, payday loan lenders don’t have to verify if a borrower can successfully make monthly payments, meaning the only requirement to get a payday loan is to have a checking account.

The Bottom Line

There are numerous ways to consolidate your payday loan. Once you’ve settled on a consolidation strategy that works best for you and your money, shift your focus to becoming debt-free as soon as you can. Consistently pay down your debt, save money, and build an emergency fund so you never have to turn toward a payday loan again.

Have more questions? Request a free consultation and we’ll help you decide which options are best for you.


Does Debt Consolidation Hurt Your Credit?

Yes, it does, but the damage is only temporary. As you work to pay down your consolidated debt, your score will recover and will probably improve.

Can a Payday Lender Sue You for Not Repaying Your Payday Loan?

Yes, a payday loan company can take you to court if you default on your debt. In order for this to happen, you must be delinquent on your payments and in violation of your loan agreement.

Can I Go to Jail for Not Repaying My Payday Loan?

No, but you could go to jail if you ignore a court summons or fail to follow a judge’s order.

How Can I Learn My Credit Score?

You can view your official credit score once a year for free at the Annual Credit Report website ( You can also go directly to any of the three credit bureaus – Experian, TransUnion, and Equifax, and get your credit scores from each organization. Other sources you can get an accurate report on your credit score are your credit card company as well as sites like Credit Karma.

How Can I Calculate My Payday Loan Debts?

Payday loan relief requires you to figure out exactly how much you owe first. Any type of debt consolidation will fail if you miscalculate and don’t borrow enough to fix your underlying debt problems. Use a debt consolidation calculator to get an accurate picture of your finances before you start.

Can Student Loans Be Consolidated?

Certain types of student loans can be consolidated, while others can’t. For example, private education loans can’t be consolidated. Federal loans, both subsidized and unsubsidized can be consolidated.

What is the Consumer Financial Protection Bureau (CFPB)?

The CFPB is a U.S. federal agency that protects consumers from unfair or illegal practices from banks, lenders or other financial companies.

Are Payday Loans Secured or Unsecured Debt?

Payday loans are a form of unsecured debt because you don’t have to put up any collateral to take out the loan.

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