Credit Counseling for Payday Loans

Payday loans are one of the modern-day debt traps as people who avail these loans end up paying exorbitant interest rates. There are many people out there who are looking at credit counseling for payday loans to get out of the debt trap. Payday loans are easy to avail, you just need a valid photo ID and proof of income. This is the main reason behind many people opting for a payday loan to pay their bills or when in need of emergency cash. A financial expert friend of mine said payday loans are like drugs you know they are not good for you, but you keep on taking them because they are the easiest option to fix your financial problems in the short-term.

Understanding Payday Loans

One of the reasons for the popularity of payday loans is the instant approval of these loans. You get these loans within 24-48 hours of application and the loan amount can range from USD 100 to USD 1,500. These loans are also known as cash advance loans because you have to repay them with your next paycheck. The duration of the loan is very less, it can last anywhere between 2-3 weeks. You can also avail of instant payday loans no credit check required, hence you get these loans even if you have bad credit.

However, the downside of these loans is that you end up paying heavy interest rate. To help you better understand - If you borrow USD 100 the creditor will charge you USD 20 upfront as interest and processing charges. Putting these charges in context with the annual percentage rate (APR) will give you an interest rate of 520 percent. If you take a loan from a bank you will be charged around 12 percent APR. There are many out there who take payday loans and aren't able to pay on the first due date and ask for an extension, these people then end up paying higher percentage rates on their loans. Giving these loans is so profitable that financial institutions even offer programs like no fax payday loans instant approval wherein you don't even have to fax any documents just apply online to avail your loan.

If you are in a financial mess and aren't sure what to do, enlisting the help of counseling services is a good idea. These agencies have expert counselors who will provide you professional assistance in devising a debt management plan. In most cases a counselor will help you become debt free within 12-24 months.

Financial experts advise that if you are looking to hire agencies that provide credit counseling look for nonprofit agencies. Choose an agency that is accredited by the National Foundation for Credit Counseling (NFCC) or is a member of the Association of Independent Consumer Credit Counseling Agencies (AICCCA). It is advisable to look for free credit counseling services. If you are in financial turmoil choose one that's connected to the Better Business Bureau (BBB).

The agency will appoint a qualified counselor who will take stock of your financial situation by personally meeting you or talking to you over the phone. The debt counseling will include tips on money management, negotiating with your creditors, and financial awareness programs. The best credit counseling services will also advise you on debt consolidation for payday loans so that you don't have to pay high interest rates.

You can get a list of approved agencies that provide credit counseling for payday loans and other financial situation from the government's department of justice website. Another thing to remember is to hire an agency which will charge you after the settlement is done.