Breaking Free from the Payday Loan Cycle: Consolidation Solutions

If you're having a hard time paying off payday loans, a personal loan for debt consolidation can help. Compare interest rates, terms, and more.
Written by Erin Gobler
Financial Expert
Managing Editor
twitter facebook

A payday loan is a short-term, high-interest loan people sometimes resort to when facing a financial emergency or hardship. While these loans seem convenient because of how easy they are to get, they can be quite predatory because of their high interest rates.

Unfortunately, it’s not common for people to get stuck in a payday lending cycle. In other words, they take out a payday loan, can’t pay it back in time, and must take out another payday loan to cover it. As they continue to roll over their loans, they rack up more fees and fall even further into debt.

If you’re struggling with payday loans, a payday loan consolidation can help you get under that burden. Keep reading to learn how payday consolidation loans work, when you might need one, and some alternatives to consider.

Signs You Might Need a Payday Loan Consolidation

A clear sign that you might need a payday loan debt consolidation is if you aren’t able to pay off your loan and instead must extend your initial loan, roll your loan over, or take out a new loan to cover the original one.

Another sign you might need a payday loan consolidation is if you’ve resorted to multiple payday loans and are struggling to balance the repayments. A payday loan consolidation would allow you to consolidate all your payday loans into a single loan with a much lower interest rate.

Finally, you can decide if you need a payday loan consolidation by asking yourself one simple question: Is your debt manageable in its current form? If the answer is no, a payday loan consolidation might be a good idea.

Which Lenders Have the Best Personal Loan Rates?

Finding the lender with the best debt consolidation personal loan to meet your needs is as simple as using our list of lenders below. Compare personal loans and find the best rates being offered today.

How Does a Payday Loan Consolidation Work?

A payday loan consolidation is a debt consolidation loan, usually in the form of a personal loan. When you consolidate your payday loans with a personal loan, you borrow enough to cover the total amount of the payday loans you owe.

Personal loans usually have a much lower interest rate than payday loans, even for borrowers with less-than-ideal credit scores. As a result, you’ll be able to make progress on your debt more quickly.

Personal loans have repayment terms that are considerably longer than those on payday loans. A typical payday loan might have a repayment period of just a few weeks. Meanwhile, personal loans can be paid off over several years. That, combined with a personal loan’s much lower interest rate, leads to a more affordable monthly payment.

When Is It a Smart Idea to Consolidate Your Payday Loans?

The benefit of a payday loan consolidation is that it can help make your debt more manageable and save you money on interest. Payday loans often have interest rates over 100%, so it’s understandable that so many people get caught in the payday loan cycle.

If you’re deciding whether it’s a smart idea to consolidate your payday loans, here are a few factors to consider:

Whether You Can Repay Your Payday Loan

If you’re stuck in a payday loan cycle and have to either extend your loan or take out a new one to cover it, a payday loan consolidation might be a smart idea.

Whether You Qualify for a Personal Loan

A personal loan can be used to consolidate any type of debt, including payday loans. A payday loan consolidation might be a smart idea if your credit score allows you to qualify for a payday loan.

The Interest Rate You Qualify For

The benefit of a debt consolidation loan over payday loans is the interest rate is usually much lower. Run the numbers to ensure you’ll save money in interest by consolidating your payday loans with a personal loan. There are even personal loans for consumers with fair or bad credit.

How to Consolidate Your Payday Loans

Are you considering using a debt consolidation loan for your payday loans? Here's how to get started.

Alternatives to Payday Loan Consolidation

If you don’t think a payday loan consolidation is right for you or you don’t qualify for one, here are some alternatives to consider.

Extended Repayment

Some payday lenders offer extended repayment plans, which allow you to pay off your loan over a longer period. There may be added fees, but the lower payment could make the loan more manageable.

Debt Management

When you work with a credit counselor, they can arrange a debt management plan where they negotiate with your creditors to help you pay off your loan in lower payments or at a lower interest rate.

Debt Settlement

When you go through debt settlement, you work with a company that negotiates your debts on your behalf. The goal is to get your creditors to settle the debts for less than you owe. Debt settlement can help you pay off your debts for lower amounts but can also negatively impact your credit.


Though bankruptcy should always be a last resort, it could be an option for someone who is burdened by payday loans and has no way to get out from under them. Be aware that some of your assets may be sold to pay off your debts, and it will likely take years for your credit to recover.

Further Addressing the Problem

Using a payday loan consolidation addresses the payday loans you already have but doesn’t necessarily address the root cause that led to the debt. To truly free yourself of the burden of payday loans, you must address that root problem.

If your income is currently too low to cover all of your expenses, consider how you can increase your income or what benefits you may qualify for that could help ease some of the stress on your budget.

If you’ve resorted to payday loans because of overspending, it may be time to make some habit changes. Consider what in your budget you can cut back on (or even eliminate) that would help prevent you from taking out payday loans in the future.

Finally, people often resort to payday loans when a financial emergency arises. To help avoid doing so, work on building up an emergency fund that you can dip into when unexpected financial burdens come up.

Bottom Line

Payday loans often seem like a necessary evil. While they’re usually predatory and harmful to consumers, they are also easier to qualify for than other forms of credit. Unfortunately, their high interest rates often lead people into a cycle of payday loans that can be difficult to dig out of.

If you’re stuck in a payday loan cycle, consider a payday loan consolidation to help you break out. And if a payday loan consolidation isn’t right for you, alternatives are available.

Frequently Asked Questions (FAQ)

Can you include payday loans in debt consolidation?

Yes, you can include a payday loan in debt consolidation. A debt consolidation loan is a personal loan that can be used for nearly anything. Even if your debt consolidation loan lender doesn’t pay off your payday loan directly, you can use the money from the loan to pay it off.

What are the benefits of payday loan consolidation?

Payday loan consolidation has several benefits. Consolidation loans have lower interest rates, longer repayment terms, and lower monthly payments than payday loans. As a result, they will put less of a burden on your budget as you pay them back.

What happens if I can’t pay off a payday loan?

If you can’t pay off a payday loan, you may have to either extend or roll over it or take out a new loan to pay it off. A longer-term solution is to use a payday loan consolidation.

Does everyone get approved for a debt consolidation loan?

Debt consolidation loans usually require a minimum credit score, meaning not everyone may qualify. However, several lenders offer these loans to borrowers with poor credit, so it’s worth shopping around to see if you’ll qualify.

About Author
Erin Gobler
Erin Gobler is a personal finance coach who combines her passion for coaching and writing to offer readers insightful financial advice. As a regular contributor to MoneyRates, Erin delves into topics like investing and credit cards, ensuring her audience is always well-informed. Beyond her work with MoneyRates, Erin’s expertise is evident through her extensive portfolio, which features articles on Bankrate, Fox Business, Credit Karma, and The Simple Dollar, among others. Her commitment to financial literacy and her ability to demystify complex subjects makes her a trusted voice in the finance community.
Our reviews are unbiased and thorough, focusing on consumer needs. For details, see our Editorial Policy & Methodology.