Payday Loan Relief Reviews: Escape the Debt Trap

Millions of people take out payday loans in hopes the money will help them with an emergency financial situation. But these short-term, high-interest loans often cause more harm than good.

Rather than getting people out of financial trouble, they end up trapping them in more debt they can’t escape. Fortunately, there are several effective ways to find payday loan relief starting right now.

_{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.}

How Payday Loan Consolidation Works

Payday loan relief comes in many forms, including debt settlement, debt consolidation, and credit counseling. So, the way it works depends on the method you choose.

Some options, such as debt consolidation, help you save money or make payments more affordable by combining several high-interest loans into one with a lower interest rate. Other methods, like credit counseling, give you the tools to start improving your finances while tackling debt.

The payday loan relief strategy you choose depends on your financial situation. With that in mind, here are the best methods for those looking for some relief from their payday loans.

Debt Consolidation

Debt consolidation lets you roll several high-interest, unsecured debts like payday loans or credit cards into one fixed monthly payment. Done right, this strategy can streamline your monthly payments, reduce what you owe in interest, and even help you pay off your debts faster.

It’s a solid option for people with good credit who can get a lower interest loan large enough to cover their other debts. Since there’s only one monthly payment, many people also find it easier to keep on top of their bills.

You can consolidate debt with a debt consolidation loan, balance transfer credit card, or home equity loan. But you will need to find a reputable online lender or financial institution that offers this option. Or you can go with a debt consolidation company. Check their online reviews on the Better Business Bureau (BBB) and accreditation before signing on to anything.

Debt consolidation isn’t for everyone, though. Only go this route if you qualify for a 0% balance transfer credit card or low-interest loan that covers your other debts. Make sure you have enough cash each month to cover your payments, too, or it could cause more financial harm.

Use an online calculator to determine if the new loan and loan payments make sense for you when in doubt.

READ MORE: Step-by-step guide to payday loan debt consolidation

Debt Settlement

Although both debt settlement and debt consolidation are ways to manage debts, the method is different. Essentially, debt settlement helps lower your overall debt, while consolidation reduces how many creditors you have.

Debt settlement is the process of taking what you owe and getting creditors or lenders to decrease the total balance. This process is usually handled by a for-profit debt settlement company.

With this debt relief strategy, the company will attempt to negotiate with your creditors to reduce how much you owe. In most cases, they’ll advise you to stop paying your creditors. This is because most creditors will only agree to settle debts if the alternative is not getting paid at all.

While the company negotiates, you’ll start making monthly payments into a secure savings account or Certificate of Deposit (CD). If negotiations go well, the debt settlement company will use that money to pay off your creditors in a lump sum or installments.

Debt settlement companies usually charge between 15% and 25% of your enrolled debt for their services. They cannot, however, require you to pay anything until after they’ve completed the settlement process. If a company does request upfront payment, look elsewhere.

It typically takes 4 to 6 months for the first settlement to occur. The average borrower saves around 30% on their total debts after fees.

There are some risks with debt settlement. For example, your creditors could report any late or missed payments to the bureaus, which will hurt your credit. If the settlement process doesn’t work, you could be responsible for paying any fees that have racked up. The debt settlement industry is also rife with scammers, so make sure you choose a legitimate company.

READ MORE: Best payday loan consolidation and relief companies

Credit Counseling

Credit counseling involves working with a certified counselor to sort out your finances and find ways to manage your money. Services range from budget creation to financial education workshops to debt management plans (DMPs). Most companies are non-profit and offer their services for free or at a low cost.

A debt management plan lets you combine several unsecured debts, including payday loans and credit cards, into one payment plan. These plans usually take 3 to 5 years to complete but can help you pay off your debt.

Unlike debt settlement, credit counseling agencies don’t try to negotiate your original balance down. Instead, they try to get the lender to drop certain fees, reduce interest rates, and extend your repayment period.

There are a few downsides to DMPs. For one, they typically come with a start-up fee that’s around $30 to $50. Some also have a monthly fee between $20 and $75. There’s also no guarantee that a lender will agree to the plan.

Still, a DMP could end up saving you hundreds or thousands of dollars in interest. It also has no direct impact on your credit score. In fact, it could help improve your credit by bringing accounts current and reducing your credit utilization ratio.

If you’re interested in credit counseling or DMPs, head to FCAA.org to find a credit counseling agency.

Best Payday Loan Consolidation Company Reviews

It’s easy to get stuck in a trap set by payday loan lenders, but very difficult to escape. Here are some of the top companies that could help you out.

Accredited Debt Relief

Established in 2011, Accredited Debt Relief specializes in creating custom debt relief programs to help people reduce how much they owe in unsecured debt. They offer help with debt consolidation, debt management, debt settlement, and bankruptcy. Historically, they have successfully settled debt by as much as 50% within 12 months, which is faster than most competitors.

On BBB, the company is accredited and has an A+ rating with 4.73 out of 5 stars. On Trustpilot, it’s a verified company with 4.8 out of 5 stars out of 3,976 reviews.

What people are saying:

Freedom Debt Relief

Founded in 2002, Freedom Debt Relief is one of the country’s leading debt relief and consolidation services. In the past 20 years, they’d worked with over 800,000 customers to settle more than $15 billion in debt. This company specializes in unsecured debts such as personal loans, credit cards, and medical bills.

Freedom Debt Relief is BBB accredited with an A rating. On Trustpilot, it has 4.5 out of 5 stars with over 35,000 customer reviews.

What people are saying:

JG Wentworth

Established in 1991, JG Wentworth offers debt consolidation, a structured debt settlement program, bankruptcy help, and annuity purchasing. The company deals with most forms of unsecured debt.

JG Wentworth is accredited by the American Fair Credit Council (AFCC). The company has an A+ rating on BBB with 4.2 out of 5 stars and 107 customer reviews.

What people are saying:

Top Payday Loan Relief Company Reviews

DebtHammer

Based in Texas, DebtHammer provides debt relief to those struggling with predatory loans. The company uses tried-and-true methods and a simple but effective process to get people out of the payday debt trap. They also have an impressive array of financial education resources for people looking for ways to pay down and stay out of debt.

Online, DebtHammer has positive customer reviews. On Facebook, they have 169 followers and a 5-star rating.

What people are saying:

InCharge Debt Solutions

Established in 1997, InCharge Debt Solutions has helped millions of consumers find debt relief through debt consolidation, debt management plans, and free credit counseling. This nonprofit company is also a member of the National Foundation for Credit Counseling (NFCC).

On their website, they mention a 97% customer satisfaction rating, which is consistent with the generally positive reviews they have. The company is BBB accredited with an A+ rating, but it has 3.12 out of 5 stars. On Trustpilot, it has 4.8 stars out of 5 with 1,955 reviews.

What people are saying:

Top Credit Counselor Reviews

Cambridge Credit Counseling Corp.

Cambridge Credit Counseling Corp. is a nonprofit company that has a team of highly experienced credit counselors. They offer credit counseling, reverse mortgage counseling, bankruptcy counseling, student loan counseling, and debt consolidation. According to their website, the average program takes 48 months and the typical consumer sees a total interest savings of over $18,000.

The company has overwhelmingly positive reviews online with 4.9 out of 5 stars on both ConsumerAffairs and Trustpilot. 

What people are saying:

GreenPath Financial Wellness

Founded in 1961, GreenPath Financial Wellness is a nonprofit company offering an extensive array of financial services, including credit counseling and debt management plans. They also specialize in debt counseling, bankruptcy support, and housing counseling.

They have 4.9 out of 5 stars on ConsumerAffairs with 91 ratings. They’re also BBB accredited with an A+ rating.

What people are saying:

DebtWave

DebtWave Credit Counseling, Inc. is a nonprofit credit counseling service specializing in helping people get out of debt and improve their long-term financial situation. They also offer bankruptcy help, credit coaching, and debt management.

They’ve assisted over a million consumers pay off over $7 million in credit card debt. Unlike other credit counseling companies, they also have a community outreach team that offers free educational workshops to low-income families, military personnel, and the youth.

On BBB, they have 4.94 out of 5 stars with 94 customer reviews and an A+ rating. On Facebook, they have a 4.9-star rating.

What people are saying:

Should I Hire a Debt Consolidation or Debt Settlement Company? 

Debt settlement and debt consolidation are both ways to cut down on how much you owe. However, they have their pros and cons, so the answer depends on your situation.

Consider debt settlement if:

• You’re at least 3 months behind on payments or your accounts are in collections
• There’s a chance your creditors will accept a lower payment
• Your credit score has already been seriously damaged
• You’re looking for a faster way to reduce your debts (debt consolidation can take several years)

Consider debt consolidation if:

• You’re struggling to keep up with multiple high-interest debts with different payment amounts and due dates.
• You want to decrease how many creditors or lenders you have and make one monthly payment instead.
• Your credit score is good and you qualify for the best interest rates.
• You can afford the new monthly payment.

Whichever option you choose, here are some red flags of scam companies to watch out for:

• Payment requested upfront
• Guarantees for how much debt they can settle
• Vague terms on the loan or service offered
• High-pressure tactics to get you to sign legally binding documents

Be cautious and do your research before choosing either option and make sure you understand the risks.

DIY Debt Consolidation

If you prefer a more hands-on strategy, consider DIY debt consolidation.

Start by tallying up how much debt you want to consolidate. This could be payday loans, medical bills, credit cards, or certain other unsecured debts. Write down the balance, interest rate, repayment period, and monthly minimum payment for each.

Next, make a budget based on your total monthly income and expenses. Look for ways to cut back on spending and put more money towards debts.

Then, get a copy of your credit score and report from each major credit bureaus — TransUnion, Equifax, and Experian. This will give you an idea of what types of financing you might qualify for. Review your reports for errors. If you find any, dispute them to give your credit a boost.

Once that’s done, consider your options. Do you want to get a personal loan, debt consolidation loan, or a balance transfer credit card? Or would a home equity loan or HELOC be better? Though most loans require good credit, there are even debt consolidation loans for borrowers with bad credit or those with fair credit.

Whatever you choose, the interest rate should be lower than the payday loans. You should also be able to afford the new payments.

If you’re having trouble getting financing elsewhere, consider asking a family member for a loan. This can be uncomfortable, so choose someone you have a good relationship with. Lay out the terms so they understand exactly what you need, why, and the repayment terms.

Pros of Payday Loan Relief

Depending on the strategy, there are quite a few pros to payday loan relief, including:

• Lower monthly payments
• Decreased interest rates
• Longer repayment period
• Potentially hundreds or thousands of dollars are saved over the life of the loans
• Effective strategies to become debt-free
• No more automatic debits
• Escape from the payday loan cycle
• Reduced chance of being sued
• Lower chance of missed or late payments, meaning fewer late fees
• Long-term credit score improvement
• Peace of mind knowing you’re on the right track to paying off your debts

Cons of Payday Loan Relief

There are also a few risks or downsides to payday loan relief, depending on the strategy. These include:

• Negative impact to credit score if told to stop making payments to lenders
• Late fees can add up
• Delinquent accounts
• No guarantee of success, especially with debt settlement
• Potential pressure to sign up or make a snap decision
• High eligibility requirements for a debt consolidation loan or personal loan
• Prevalence of scam companies
• Account setup and monthly fees can be high when struggling with finances
• Doesn’t work if you take out more payday loans

What to Look For When Choosing a Payday Loan Relief Company

If you’re trying to find the best payday loan relief company, here are some things to look for:

• Customer reviews online — check Trustpilot, BBB, Google, etc. to see what people are saying and how responsive they are to complaints
• Legitimacy of their services
• Whether they offer a free consultation or a moneyback guarantee
• Any testimonials on their main page
• If they charge upfront costs
• Any other fees
• Enrollment or eligibility requirements

Payday Loan Alternatives

Payday loans are meant to be used for emergencies, though many people fall into the habit of using them for other short-term expenses. If you’re looking for a more affordable alternative, consider a cash advance app or payday alternative loan (PAL).

Cash Advance Apps

With a cash advance app like Earnin or Brigit, you can borrow $200 to $500 from your upcoming paycheck a few days before you get paid. This can be helpful if you would have otherwise missed a payment or if there’s an unforeseen expense.

Some apps come with a monthly subscription fee, while others charge a small percentage on the withdrawn amount. Others are free with an optional tip. Even those with a fee are still more affordable than payday loans.

With some apps, you could receive the funds the same day you request them. Other apps have a delay of a few days.

Payday Alternative Loans

Payday alternative loans, or PALs, are small loans offered through federal credit unions to their members. They have a maximum APR of 28% and have a longer repayment period than traditional payday loans. They also cannot be rolled over into a new loan, so there’s no debt trap.

There are two types of payday alternative loans:

• PAL 1: You can borrow between $200 and $1,000 with a 1 to 6-month repayment period. You must be a member of a credit union for at least one month to qualify.
• PAL 2: You can borrow up to $2,000 with a maximum repayment period of 12 months. There is no waiting period to qualify.

Other Types of Loans for Payday Loan Debt Relief

Looking for other ways to pay off multiple payday loans? Here are some of the best options.

Debt Consolidation Loan

If you want to simplify multiple high-interest debts into one fixed monthly payment, consider getting a debt consolidation loan. These are a form of personal loan that have an APR ranging from around 4.00% to 36.00%, which is much lower than payday loans. They also have a longer repayment period of at least a few years.

These loans are usually more affordable and easier to deal with than several debts. By getting one, you could save thousands of dollars in interest, as well as decrease the risk of late payments.

However, you will need good credit — at least a 690 FICO score — to qualify for the best rates.

Installment Loans

Installment loans are a type of loan that must be repaid in regular monthly installments. Usually, they have a fixed interest rate, though some have variable interest instead. They also have a longer repayment period than payday loans.

These loans are versatile in that they can be used for nearly anything, including paying off payday loans. Depending on your credit and debt-to-income ratio, you can also borrow nearly any amount you need.

Personal Loans

With a personal loan, you can borrow what you need to cover anything from medical bills to home repairs to payday loans.

There are two types of personal loans: secured and unsecured.

A secured loan uses some form of collateral – like a paid-off vehicle – to back the loan. If you default on payments, you risk losing that collateral, which makes these loans easier to qualify for since the borrower assumes most of the risk. Unsecured loans don’t require collateral and instead rely on the borrower’s credit score, DTI ratio, income, and other factors.

Most personal loans have between 3.00% and 36.00% APR and a repayment period of several months or years. loan. These loans usually have more affordable monthly payments, which makes them more manageable than high-interest payday loans.

Peer-to-Peer Loans

Certain platforms like Upstart and Peerform offer peer-to-peer (P2P) loans. With P2P lending, you work directly with an individual investor to secure financing. As with traditional lending, the investor sets their own terms, interest rates, and other fees. They also determine the borrower’s eligibility rates based on factors like credit score and income.

P2P lending is a good option for those who don’t qualify for most traditional forms of financing. This could be due to several reasons, including poor credit or a derogatory item in their credit report (ex. bankruptcy).

You can use a P2P loan for nearly anything, including debt consolidation.

Credit Card Cash Advance or Balance Transfer 

A balance transfer is where you take one high-interest credit card balance and move it to a lower interest account. Usually, these come with a fee of 3% to 5% of the transferred amount. However, some card issuers will waive this fee.

If you have exceptional credit, you might be able to find a balance transfer credit card that comes with a 0% introductory APR period. Usually, this period is between 12 and 18 months. As long as you can pay off the full balance within that time frame, you won’t be charged any interest.

Before doing a balance transfer, use an online calculator to see if it makes financial sense. With one, simply input key information like your current balance, interest rate, and monthly payments. Then, calculate how much you could be spending after any balance transfer fees, intro APR and terms, and so forth.

The other option is to do a credit card cash advance. This is where you withdraw a small sum – no more than a few hundred dollars – from an existing credit card.

Cash advances typically come with higher interest rates than the credit card itself, but it’s still lower than what you’d find with payday loans.

Benefits of Debt Consolidation

There are several benefits of debt consolidation.

For starters, it lets you roll unsecured debts into one bigger loan with a fixed monthly payment and lower interest rate. Having only one monthly payment can simplify your finances and make it easier to see progress as you pay off debt.

You can also consolidate debts like student loans, medical debt, and credit cards. Done right, it can reduce your total monthly payments and give you more time to pay off your debts.

As you make on-time payments and pay down your debt, you’ll also start seeing an improvement in your credit score.

Ultimately, debt consolidation can help organize your current debts and find debt relief. However, it won’t solve fundamental financial issues such as overspending or bad budgeting.

Why Does My Credit Score Matter?

A person’s credit score indicates their creditworthiness, something that matters to prospective lenders, landlords, utility companies, and even employers. Whenever you want to apply for financing or a new apartment, the company will check your credit as part of the qualification process.

That’s why having a good credit score is important. Not only does it improve your approval odds, but it also means better interest rates and loan terms. In the long run, having good credit could save you thousands of dollars.

There are many places that offer free credit scores, so it’s important to regularly monitor your number.

If your credit score has dropped, or if you’re trying to build credit, request a copy of your credit report. You can do this through the credit reporting agencies or annualcreditreport.com.

Once you have your reports, check them for any errors that could be dragging your score down. If there are any, be prepared to file a dispute.

The Bottom Line

Payday loans are costly and, more often than not, lead to a lasting cycle of debt. However, if you’re trying to find payday loan relief, you have options ranging from debt consolidation to debt settlement.

With some financial planning and dedication, you can become debt-free with time. But if you need more direct guidance or help, don’t be afraid to ask.

FAQs