Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Nov 30, 2011

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When a borrower finds himself in a position with multiple payday loans that he’s unable to payoff, one way of pursuing debt-freedom is by consolidating all of the loans into a single payment.


Single payments can provide a variety of benefits:

  • Reduced monthly payments.
  • Harassing collection calls stop.
  • Removal of responding to and paying multiple bills.
  • Budgeting and saving becomes easier since there’s just a single bill to pay.


There are two ways of consolidating payday loans: a consolidation program or a consolidation loan.


Consolidation Programs


Consolidation programs are hosted by companies that specialize in helping borrowers manage their debt. These companies work with payday lenders and attempt to negotiate an interest rate reduction. If negotiations are successful, they often result in lower monthly payments for the individual.


The company then acts as the middle-man between borrower and lender. They establish a new payment plan with the borrower and accept a single monthly payment from the borrower. The company then uses that money to satisfy each of the loans the borrower is responsible for.


Payday consolidation programs are wonderful tools used to pull borrowers out of the payday loan trap some fall into.


Consolidation Loans


Consolidation loans refer to single loans that ultimately provide a borrower with enough money to pay off all of their payday loans. This type of financing relieves a borrower of contact with payday lenders, and effectively puts an end to harassing phone calls and junk mail.


The downside to consolidation loans is that they come with hefty interest rates of their own. While a borrower sheds the weight of payday loans, they take on a new loan. However, consolidation loans allow for a single payment, so a borrower does not need to juggle multiple monthly payments.


Both consolidation programs and loans allow borrowers to escape their debt trap. Depending on the price of available programs or the interest rate on a new consolidation loan, a borrower can choose the route that will provide him with the best chance of obtaining financial freedom.


Avoid Scams


Do not fall for promises to remove all of your debt. Such services are not possible, and are often nothing more than an enticing hook to pull troubled borrowers into scams.


The Pennsylvanian Attorney General offers great advice to the entire nation when it comes to finding the right loan or credit counseling agency:

  • Shop around, and gather quotes from at least three companies or sources.
  • Ask a lot of questions, and make sure you know exactly what this company or service will do for you.
  • Avoid any service that offers “voluntary fees.”
  • Ask if the contact you’re working with gets paid commission. If they do, then they likely do not have your best interest in mind, as they’re simply trying to seal a deal.