Payday Loan to Settle Debts: When is a Good Option?

Hiring a new Payday deductible loan may seem like a bad idea at first. However, it is a good strategy to replace high debts, such as overdraft and credit card debt, with one that has lower interest rates. Find out in which cases it is advantageous to get a loan to pay off more expensive debts and the care that should be taken in this situation. But after all, when borrowing a Payday deductible loan is a good option?

This has been a behavior adopted by many Brazilians to reach the long-awaited financial equilibrium again. According to a 2016 survey by the Credit Protection Service and the National Confederation of Shopkeepers (CNDL), 41.6% of Brazilians resorted to payday loans to banks and financiers to repay debts. Especially those related to credit card. This practice is very common today as well as credit card interest leads the ranking of the highest in the market.

Despite a scenario of lowering the interest rate, Felic, it is still essential to seek information and put the numbers on paper before committing to any type of loan. But one thing is certain: If the bills are tight and you no longer want to get tangled up or in the red, the good news is that there are alternatives to recovering your financial health.

So know when to use the deductible Payday loan to pay off the debts.

When To Use A Payday Loan To Pay Off Debts?

The payday loan is a good option to organize and pay off the debts. And one opinion seems to be unanimous among economists: 

It is essential to look for the cheapest credit, ie in emergencies where it is not possible to meet the full debt repayment, it is important to compare the interest of other available credit lines. This way each consumer can choose the option that fits their real needs and financial conditions.

1) Pay off credit card debt and overdraft

credit card debt and overdraft

Credit card interest and overdraft accounts for much of today’s debt. It all starts with an initial debt, which when not paid in full, increases in value due to high interest rates. And interest on interest generates more and more expensive debt and sometimes two, three times higher. Thus, in case of not having money to pay credit card debts or when it is decided to pay only the minimum amount, the debt will accumulate.

By choosing the minimum credit card payment, the consumer will enter the so-called revolving credit. That is, in a kind of financing of the total amount of the invoice, which also causes the debt to increase. According to information released by the Bank, average interest on credit card operations totaled 334.6% last year. The same goes for overdraft installments, where interest rates are second only to those on the credit card. In these cases, a good strategy is to take out a Payday loan that offers cheaper interest rates. The interest difference between Payday-deductible loans and credit cards or overdrafts can reach more than 300% per year. Thus, this type of credit has long been recommended as a smart way to replace high interest rate debt.

But after all, what is the Payday loan?

What is Payday Loan?

In Payday loans, the bank has more guarantees that it will receive the payment, as the installments are directly discounted from the Payday or social security benefit. This explains the considerable difference in interest compared to other lines of personal credit.

If the goal is to pay off debts, before hiring any kind of credit, therefore, it is essential to research and look for different institutions and make online credit simulations. Interest rates and Total Effective Costs can vary greatly from bank to bank.

2) To clear the name quickly

settle debt

Those with negative CPF in the market know how difficult it is to get new credit to make a loan, consortium, buy products or even rent a property. To say the least, among many other embarrassing situations that can bring other personal and financial losses. If what led the consumer to have the name protested is precisely the non-payment of the previous debt, this may be an important alert. Mainly, the lack of ability to afford a more expensive account.

Thus, to avoid further entanglement, people who belong to the eligible groups for Payday loans can resort to this modality. They fall into this category Retirees, Pensioners, Public Servants, Employees of Private Enterprises and Military of the Armed Forces. It is possible to contract a Payday loan, even with restriction on Credit Protection Agencies. This is because of the payment of the loan installment, since it is directly discounted from retirement, pension or Payday.

This way, the money from the new loan can be used to pay off previous debts and “clear the name”.

3) Unify debts

Unify debts

When you have a lot of debt, each with a different amount and a different deadline, it is not so difficult to get confused or not know what to do. And worst of all: forget to pay one of them! With Payday deductible loans, it is possible to replace all outstanding debts with a single debt with more flexible terms and single installments.

This practice favors:

  • Financial control, as the money from the new loan can be used to pay off current debts;
  • Helps reduce total interest and penalties and charges.

And just as important as knowing or looking for the best debt settlement alternatives, you need to have minimal financial planning so you don’t get in debt again