Debt consolidation is something that people who are struggling with debt management might be interested in. However, whether they should use debt consolidation isn’t the only thing that they should ask.
This is because they should also ask, “How do I consolidate my bills?” when they learn more about bill consolidation.
What Are Your Options For Consolidating Your Bills?
Here are six options that can be used for consolidating bills:
Credit cards are one of the most popular tools for performing a bill consolidation because they often come with the ability to do balance transfers. Better still, some of them have a short introductory period during which they charge either no interest or low interest on these balances, which can be very useful for those who are determined to pay off their outstanding debt. This is because no interest and low interest mean that more of their payments will go towards their principal.
People can do whatever they want with a personal loan. That includes using it to consolidate their bills. Be warned that a personal loan won’t provide very good results unless people have a good credit score that will enable them to get a low interest rate. If they have a bad credit score, they might wind up paying more if they try to consolidate their bills using this method.
Home Equity Loan
Home equity loans aren’t available to everyone. This is because people can’t get one unless they have a fair amount of equity in their home. Still, if they can get a home equity loan, it can be very useful for them. This is because home equity loans tend to have more attractive interest rates and loan terms than the other options that are available to them, which makes sense because home equity loans are backed up by the equity in their home.
Debt Management Plan
Debt management plans are meant for people who are having issues with making their payments. Essentially, a credit counselor will help them come up with a suitable household budget. After which, they will make a single monthly payment, which will be allocated among their creditors. Credit counseling agencies might be able to get interested individuals lower payments and lower interest rates through negotiation. However, people should know that this is by no means guaranteed to be the case.
Meanwhile, debt settlement is meant for people who are having serious issues with making their payments. In this case, they will make a single monthly payment towards a designated account, which will be overseen by the people running the debt settlement program. Said individuals will negotiate with the creditors in an attempt to settle things in exchange for a fraction of the outstanding balances. The issue is that people might have to wait for quite a while before that becomes possible, during which their credit score will be hit hard because they won’t be making any payments towards their debt.
Bankruptcy tends to be the solution of last resort. It is important to note that it has more than one potential outcome. Chances are good that people won’t qualify for Chapter 7 bankruptcy, which will wipe out most of their debt. However, they might qualify for Chapter 13 bankruptcy, which will see them making a single monthly payment based on their monthly disposable income for their unsecured debt. After an agreed-upon period of time that tends to be five years, the remainder of their unsecured debt will be discharged.
Should You Consolidate Your Bills?
People need to know the answers to the question “How do I consolidate my bills?” before they can get the process done right. As such, they should make sure to do their research, particularly since this can have such a huge impact on their finances as well as the other aspects of their lives. It’s the right decision for a lot of people, you just have to make sure your situation fits.
Palak Singhal is an English Literature Post-graduate from University of Delhi, India. She has a particular interest in writing blogs on different topics.