Payday Loan Consolidation: How to Get Relief that Works

For many stuck in the payday loan trap, consolidation is one of the only forms of relief that can help.

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Financial emergencies can strike when we least expect them, leaving us scrambling to cover urgent expenses. Under such circumstances, many turn to payday loans as a quick solution, only to be caught in a high-interest debt cycle. Juggling multiple payday loans can quickly become overwhelming, leading to a vicious cycle of borrowing and expensive payments that can strain even the most resilient budgets.

Fortunately, there’s a solution. Payday loan consolidation offers a lifeline to individuals burdened by multiple loans, providing a way to regain control over their financial well-being. It is important to understand the benefits and how they can help you break free from the grip of payday loan debt.

How to Consolidate Payday Loan Debt

Most people who fall victim to payday lending usually have trouble getting any other type of loan because of their credit history. But there are exceptions. If you need payday loan relief, it’s worth figuring out whether one of the following options will work for you.

Not only is it possible to consolidate your high-interest payday loan debt into a single monthly payment, but it’s also the most effective way to break the cycle and escape the payday loan trap.

Here’s how to do it.

In this guide we’ll cover:

What is Payday Loan Consolidation?

Payday loan consolidation is a process that combines multiple payday loans into a single loan with more favorable terms. It aims to help consumers who are struggling with multiple payday loans by providing them with a more manageable repayment plan. If a loan isn’t an option because you don’t qualify, another way to do it is through a program. Payday loan consolidation programs involve working with a specialized agency that negotiates with lenders on behalf of the borrower to arrange lower interest rates, extended repayment periods, or reduced monthly payments. This approach helps individuals simplify their debt and regain control of their finances.

READ MORE: Payday loan interest rates — they’re higher than they seem

Pro tip: Some payday lenders may offer an extended repayment plan, which lets you make smaller payments over a longer period of time. This option might carry an additional fee, and terms can vary by state and lender. If you really just need a few extra weeks to repay a single short-term loan, a payment plan may be your best option.

So, which is better, a consolidation loan or a consolidation program? Here we’ll cover these two.

Do You Need Payday Relief?

Get lower payments and immediate cash relief with a payday loan consolidation program.

Disclaimer: Credit Summit may be affiliated with some of the companies mentioned in this article. Credit Summit may make money from advertisements or when you contact a company through our platform.

Type 1: Payday Loan Consolidation Programs

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

You will typically make a monthly payment to your payday loan relief program that’s lower than they amount you’re currently paying. That money will be deposited into a savings account and that money will be used to repay your payday lenders. In some cases, your debts will be “settled” for a total that’s less than what you owe. These companies charge fees, but the fees are usually offset by the savings from the settlement.

DebtHammer (Top Pick)

READ MORE: Here are the 4 best payday loan consolidation & relief companies


  • Lower monthly payments: These types of programs sell borrowers on the fact that they dramatically reduce their monthly payments. Giving them immediate cash relief in addition to long-term savings.
  • Lower debt amount and no interest: 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 and negotiations (if applicable) 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 (however, they won’t give legal advice), offer personal finance advice and help you with whatever you need.


  • Lots of scams out there, beware
  • Only works with certain lenders
  • Not designed to prevent debt collectors from calling

Will it Work for You?

Payday loan consolidation/relief programs don’t check credit scores. 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.

In summary, if you’re drowning in payday loan debt owing over $1,000 with subprime credit and don’t know what to do, then a payday loan consolidation program may work well for you.

Pro tip: Make sure to research debt consolidation companies and check customer reviews. There are plenty of scammers out there trying to get your banking information. If you think you’ve found a debt consolidation program that isn’t legitimate, please notify the Consumer Financial Protection Bureau (CFPB.)

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Type 2: A Debt Consolidation Loan

debt consolidation loan is a personal loan you take out to repay your lenders.

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.

The way it works is simple.

First, you apply for the loan to see if you can get approved. Once approved, you take that cash and pay off your lenders. Now you pay back the new loan.

READ MORE: How to get out of payday loan debt for good

Pro tip: Getting a new loan to consolidate payday loan debt could be tricky. Many personal loan lenders require a minimum of $1,000 in debt. But lenders are also reluctant to loan too much money to borrowers who are already struggling with payday loans. If you have over $2,000, your best option is to contact a debt relief program.

When considering a consolidation loan, we want to be able to achieve four main goals:

  1. Does a loan consolidate all of your unsecured debt?
  2. Is the interest rate below 20% or lower than your current interest rate?
  3. Is the monthly payment less than what you are currently paying on your monthly minimum payment, and is the payment affordable?
  4. Will the loan get you out of debt in 48 months or less?

If the answer is yes to all four questions, then a debt consolidation loan will solve your debt problem. If the answer is no to any of these questions, then a debt consolidation program may be the better solution.


  • 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.


  • Difficult to qualify
  • Need to completely understand loan terms

Will it Work for You?

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.

If you have the ability to win approval for a larger loan and have the discipline to ensure that you won’t use more payday loans or run up your credit cards once your debts are consolidated onto the new loan, this is a good option for you.

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Benefits of Consolidating Your High Interest Loans

If you’re stuck in the payday loan trap, you can most likely benefit from a payday loan consolidation plan. Here are several of the benefits of consolidating your debt.

Reduced Fees and / or Interest Rates

Payday loans can have astronomically high interest rates. In fact, often these types of loans have APRs of 300-400%! A typical credit card APR range is 20-30%, so it’s easy to see why so many fall into the trap.

A consolidation loan can lower your interest rates significantly, especially compared to payday loan interest rates. If you instead use a consolidation program, they will eliminate the burden of interest completely and negotiate a settlement on the principal balance instead. Either way, that’s hundreds or even thousands of dollars saved over the course of your loan’s lifetime.

Unlike payday loans, which usually must be repaid within two to four weeks, personal loans offer a variety of repayment terms that generally range from 12 to 84 months. You can choose the term that works best for your budget.

Flat Monthly Payments

Most do not realize what happens when they are late on a payday loan, and that’s understandable: the fine print is so confusing even some of the world’s best lawyers have trouble comprehending it. Late fees, high interest rates, and rollover options; it’s almost impossible for anybody to understand them.

When consolidating your loans into one, a great credit consolidator will package everything up into a plan that’s much easier to understand. They will give you a much more straightforward monthly payment plan, where all you need to do is pay a flat amount each month.

Flexible Repayment Terms

Unlike most payday loans, a personal loan designed for debt relief will give you some flexibility on the monthly payment amount, the timeframe of the loan, and the other associated components. Most payday loan borrowers will find that a debt resolution plan is actually quite reasonable compared to payday debt.

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Alternatives to Consolidation

You don’t need to consolidate your loans to get out of payday loan debt.

But if you really need relief from payday loans and you can’t get approved for a personal loan or payday loan debt relief program, there are other debt relief options. Here are a few debt relief options:

Payday Alternative Loan (PAL)

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.

How it Works

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.

  • Fixed interest rate: You won’t pay more than 28%.
  • No rollovers: PALs are issued one at a time to borrowers; borrowers will not be allowed to have more than three PALs within a six-month period.
  • Low fees: Credit unions are already known for low fees, but PAL application fees are capped at $20.
  • No credit check: As long as you’re a member of the credit union, you’re eligible to apply.
Will it Work for You?

This is a good way to break free of the payday loan debt cycle. If you are struggling to pay off multiple payday loans but don’t need to deal immediately with other debts, these are an ideal way to break the cycle and reset your financial situation.

READ MORE: How do Payday Alternative Loans work?

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Ask for Extended Repayment Terms

Both storefront and online cash advance companies know that they will not get all of their money back. That’s why the interest rate is so high. So it can’t hurt to call your lender and ask for a repayment plan with reduced interest charges. From their perspective, they’d rather get half of their money than none of it.

READ MORE: Can you get an extension on a payday loan?

Work with a Credit Counselor

There are people who have dedicated their entire lives to fight payday loan lenders and help get clients debt free. These are called credit counseling services.

Credit counselors have wide expertise in many areas of personal finance, including credit card debt, mortgages, student loans, unsecured loans and more. They can create Debt Management Plans (DMPs) to help you tackle a debt payment plan. But one area they focus on is payday loans and helping people get out of the deadly payday loan cycle. Be sure to do your research to understand whether your credit counselor has experience with payday loan consolidation. They can seriously help your financial situation.

This video by Michael Bovee does a great job at explaining credit counseling.

Additionally, credit counselors stay in tune with guidelines and laws set by the Consumer Financial Protection Bureau (CFPB), a government organization that does all it can to fight predatory lenders. To find a local credit counselor, call your local credit unions and see if they have any recommendations.

READ MORE: Debt settlement vs. debt management

Talk to Legal Aid Attorneys

Many payday lenders operate in the gray area of the law, and there are some attorneys that will work with you in order to fight these predatory lenders and reduce your debt amount. A competent lawyer will help explain your debt settlement rights and the best way to get out of your payday loan problem. Contact the National Consumer Law Center for more information.

READ MORE: Can a payday loan company sue you?

File Chapter 7 Bankruptcy

Note: this should be a last resort. Talk to a lawyer before exploring this option.

Chapter 7 bankruptcy is a legal process that allows you to discharge some or all of your debt. It requires you to follow a very rigid legal process and can result in asset seizures or wage garnishment.  It most definitely involves time in court. State law governs bankruptcy, so your options differ by state. Around 800,000 Americans declare bankruptcy every year.

Also, there’s no way to keep a bankruptcy from being reported to the credit bureaus, so bankruptcy will hurt your credit score. So be sure to only use this as your last resort.

READ MORE: Types of bankruptcy

Borrower Stories

Jeanine D.


“I owed over $4,000, and half of that was in fees. Thanks to payday loan consolidation I was able to reduce my amount owed to only $200 which I’ve almost completely paid back!”

George F.


“My payday loan debt got to the point where I would never pay it back, and I went into extreme depression. My health and family suffered more than I can say. I’m so glad I consolidated my loans and will never go back to the payday loan store ever again”

Grace B.


“Thanks to payday loan consolidation, I was able to reduce my fees to only $200 per month. I started saving, working overtime, and was debt free in about 12 months. A huge burden off my shoulders.”

The Bottom Line

There are numerous ways to consolidate your payday loans. 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.


Can the Government Help with Payday Loans?

Unfortunately, the government provides very little help to individuals struggling with payday loan debt. As far as legislation, very little has been done at the Federal level. Several states have outlawed payday loans, but often tribal lenders use their tribal immunity in order to give loans in these states. So, unfortunately, Uncle Sam isn’t much help to payday borrowers.

Can I Consolidate ALL of my Payday Loans?

This depends on a few things.

First off, if you’re working with a payday loan relief company, they may not work with certain lenders. This is particularly true for payday loan consolidation companies that rely on negotiating with lenders.

If you’re using a debt consolidation loan, you can consolidate as many of your loans as the debt consolidation loan will allow. So if you are approved for a $1000 loan and you have two payday loans with $500 each outstanding, you can pay off both of them. However, if you have three payday loans with $500 outstanding, you can only consolidate two of them. If you’re in this scenario, always pay the highest interest loans first.

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.

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