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Bill Consolidation: How to Know if it’s Right for You

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If you are in debt, you may have considered bill consolidation. It makes sense to make just one payment instead of several payments, right?

Bill consolidation allows you to pay off multiple debts with one monthly payment. Consolidating bills through debt consolidation can be helpful to people with lots of debt because it helps them with managing and paying off their debt faster.

There are several advantages of consolidating multiple debts into one payment. However, here are three important questions to ask, as well as bill consolidation options to consider when determining if it is right for you.

Will Consolidating Your Bills Lower Your Monthly Payments?

Most people with lots of debt struggle to just keep up with the monthly minimum payments, which becomes a financial burden. Debt consolidation may be a good option to reduce the financial burden by lowering the monthly payment.

If you are dealing with a financial hardship, consider connecting with a debt consolidation company or a nonprofit organization, like CESI Solutions, to help you establish a debt management plan with your creditors. The monthly payment paid to the debt consolidation company goes toward paying each of the balances to your creditors, including any interest and fees.

Will Consolidating Your Bills Lower Your Interest Rates?

Many types of debt, like credit cards, have very high-interest rates, up to 30 percent or more. If loans or credit cards have a high-interest rate, your debt is growing faster than you can pay it off. Bill consolidation through a debt management plan may help because creditors may be able to offer lower interest rates than you can get on your own, which would save you money, in the long run.

Some credit card companies offer “0 percent interest” credit card balance transfers. The zero percent credit card balance transfer offer is very attractive, but it usually comes with a balance transfer fee of two percent to 5 percent of the total balance), including other maintenance fees. Also, if you have a problem with overspending, it may not be the best option because it may tempt you to spend more.

Will Consolidating Your Bills Help Manage Your Money Better?

If you have a hard time keeping up with all of your monthly payments and various due dates, consolidating bills will give you a single payment and due date. Consolidating your bills may help you manage your money better monthly.

If you own your home, a home equity loan, or Home Equity Line of Credit (HELOC), may be a good option for you. A home equity loan allows you to borrow money against the value of your home, sometimes up to 75-80 percent of your home’s value. With home equity loans, the loan amounts, interest rates, and the loan terms for paying back are usually fixed. However, HELOCs allow you to apply for a credit limit that you can use as you need it. The amount due, interest and loan terms for paying back the loan may vary and are not fixed. Since your home is the collateral for the “secured” home equity loan or HELOC, if you stop paying your mortgage, the bank can foreclose or take your property.

Is bill consolidation a good idea? It depends on your situation. It is important to do your homework and understand your options.

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