Bill Consolidation Resources
How To Consolidate Bills
Designed specifically for unsecured debts, bill consolidation programs can help you find relief from the misery of crushing debt. If you have been looking for debt relief, here is what you should know about debt consolidation programs and actual bill consolidation loans.
Bill Consolidation Loans When you take a bill consolidation loan, you are essentially taking one large loan that all the smaller debts will be rolled into. There are many benefits to taking advantage of bill consolidation loans.
• Lower Interest Rates – High interest rate credit cards can be rolled into a personal loan with a lower rate, helping you save money. • Control – You will enjoy greater control over your finances, because you will only have to make one payment. You will eliminate the regular late fees that might be plaguing you, allowing you to pay off the debt faster. • Avoid bankruptcy – If you file bankruptcy, the courts will force you to tap into equity that is in your home, cars and other assets. The fees associated with bankruptcy are high and your credit will take a serious hit. With the right consolidation loan, you can avoid bankruptcy and save your assets from being liquidated. • Convenient – These loans are convenient because you will only make one payment. You will know exactly what that payment is every month and you will know exactly when your debt will be paid in full. • Open Accounts – You can keep charge accounts open when you choose this option. However, it’s still highly recommended that the cards be cut up or frozen in a block of ice to discourage charging so you can actually get out of debt rather than falling further behind. • Improved Credit Score – Those other accounts will show that they are closed and paid in full, which is a boost to your credit score. A bigger boost will prove to be the regular payments on the consolidation loan. Having just one item on your credit report that is absolutely perfect and clean can go a long way towards correcting a low score.
It is important to remember that a credit check will be required with any bill consolidation. Your credit score and income will largely determine how large a loan you can take and what the interest rate will be. Do not despair if you have bad credit. Even people with poor credit can get bill consolidation loans, although you should expect to pay a higher interest rate.
Using other assets is recommended but should be done with care. You can take a second mortgage out on the house and use that money to pay off the unsecured debt. The benefits are that you will enjoy an incredibly low payment since it can be spread out over 20 years and the interest rate will usually be remarkably low. There are two potential problems with this plan. If you ever need to file bankruptcy, you won’t be able to write off that loan because it will be secured with your home. Also, if the credit cards that were paid off are charged up again you could be left in an even more serious financial mess.
Debt Consolidation Programs These programs are only for unsecured debts. Creditors that are holding unsecured debts know that those debts can be written off in a bankruptcy. For that reason alone, they are willing to work with the debtor and are willing to make some concessions. Secured debts have an asset attached to them that can be repossessed, so creditors holding secured debt have no motivation to engage in negotiations. If the payments are not being made in a timely manner, they simply repossess the asset to recoup some of their money.
There are five steps to these programs. Each step is an important link that will help take you from crushing debt to enjoying a life that is largely debt-free.
1. Debt counseling – This free session allows the counselor to learn what your expenses and monthly income levels are. They can see what your minimum payments are and will discuss with you the different options and might work for you. 2. Negotiation - Once the company knows what your debts are, they can work with the creditors to get the interest rates lowered. Fees that have built up from late payments and over-the-limit charges can be reduced. Part of this process does include having all accounts closed, so you will no longer be able to charge items. 3. Budget – Any good repayment plan hinges on an effective budget. The company will work with you to create a budget. They will then work on determining how much money you can afford to pay towards your debt every month. 4. Repayment Plan – A plan will be outlined based on the negotiations and your personal budget. This plan will detail how much money is being paid to the creditors, what the new interest rates are and when you can expect to have the unsecured debt eliminated. 5. Monthly Payment – You will make your regular monthly payment directly to the consolidation company as outlined in the repayment plan. There will be a fee involved with this service, so you should allow for paying that fee.
Most agencies offering these services are for-profit and their associated fees can be high. Before deciding which route to take it is important that the fees associated with each loan be carefully weighed so you can make a decision.
One of the great benefits of debt consolidation is that people with poor credit can still be approved. You can’t be too far behind on the payments, but some credit problems won’t typically prevent you from taking advantage of these programs.
There are different options available when it comes to debt consolidation. Rolling all of your debt into one easy payment with a lower interest is a smart decision financially, one that can help you obtain your goals of being debt-free. Before choosing a lender, take the time to do some research and find the best lenders available.
