Bill Consolidation: 10 Reasons Why You Should Apply For Bill Consolidation

Bill consolidation is the process of combining multiple debts into one more manageable loan, often with a lower interest rates, in order to help get out of debt faster.  Instead of having various credit cards with various due dates, payments, interest rates and balances, you transfer your debt to just one loan.  Some loans such as a mortgage and student loans usually can’t be combined with other debts into consolidation.

There are thousands of bill consolidation companies to help guide you through the process, and nearly all of them will charge a fee for their service.  These fees include monthly fees, and also upfront fees. Make sure you are working with a reputable company.  Ask them about any fees associated with bill consolidation and compare fees from various companies to find the one that’s right for your situation. As a general practice, it is best to check to see if the company is approved through the Better Business Bureau.  There you can read any complaints, if any, against the company.

There are bill consolidations calculators online that can help you decide if it’s a good choice for you.  You can also use these calculators to compare different scenarios offered by various bill consolidation companies.

Before signing on the dotted line with any bill consolidation company, learn about your options regarding bill consolidation.  If you are serious about getting out of debt, here are ten reasons bill consolidation might be a good idea for your situation.

Reduce interest rate

The major benefit of bill consolidation is that it will often provide you a lower interest rate than what you are currently paying on the majority of your credit cards.  While credit cards can have rates up in the high 20 percent, bill consolidation will help you reduce that interest rate to something more manageable.

Reduce overall costs of bills

A lower interest rate means lower monthly payments.  But if you use the extra savings to pay down your debt faster, this will drastically decrease not only the time it takes to get out of debt, but the overall cost in interest as well. Even with the fees associated with bill consolidation, it might cost less in the short run to consolidate.

Waive late fees

The bill consolidation company negotiates with your lenders to sometimes forgive or waive late fees. Late fees can really add up and cause major damage to your credit score.  If late fees are waived, more of your monthly payment is going to the balance of the loan, which in turn, helps reduce your debt faster.

No new loans

While working with a bill consolidation company, this will appear on your credit report.  While it doesn’t have a direct negative impact on your credit score, lenders will see that you are currently working with a debt management company.  They might consider you have all the debt you can currently handle and thus will likely deny you any further credit. This can be very beneficial to you as you are trying to get out of debt.  This will prevent you from getting further in the hole.

One payment

Bill consolidation simplifies your debt management plan by combining all your loans into just one monthly payment.  With just one payment, your debt becomes more simplified and manageable.  You are less likely to miss or be late on a payment due to the overwhelming confusion of paying multiple bills. Instead of keeping track of various bills from various credit card companies, you will only have to worry about one bill once a month.

Free credit counseling

As part of the fee you pay for bill consolidation, many companies offer free credit counseling.  This can be very beneficial as an educational tool on debt management.  Credit counseling educates consumers of proper use of debt, how debt works, and how to get out of debt in an appropriate amount of time. It will often discuss ways to improve your credit score which can have huge positive benefits over the long run to your score.

Get out of debt for good

With a lower interest rate, more manageable payments, and a debt management plan provided though the bill consolidation company, you may finally be able to get out of debt for good.  And with free credit counseling and hopefully an improved credit score, once you get out of debt you will be more educated regarding how to use debt responsibly, if at all.

Manage debt

While it might be difficult to create a debt management plan on your own, working with a bill consolidation company guarantees you a debt repayment plan.  They will do all the organization for you, so all you have to worry about is making the monthly payment.  Depending upon the size of your debt, most of them try to work with you to become debt free in about five years.

Deal with creditors

It can be frustrating, time consuming, and difficult to deal with creditors.  By working with a bill consolidation company, the professionals handle all the negotiations with your creditors.  Since they are trained in negotiating lower rates, fewer fees, etc, it may be more advantageous than if you tried to do it yourself.  While there is a fee for this service, it may be worth it if you are unaware of how to negotiate with credit card companies yourself.

Credit Score

As you begin to make your monthly payments on time and reduce your outstanding debt, overtime, your credit score will improve.  Late payments and high debt ratios kill your credit score.  Also, since you will likely be denied any new credit while working with a bill consolidation company, the inability to add further to your debt will also likely improve your credit score.