1. Find a Bill Consolidation Loan for You
It would be great if simply consolidating your debt could solve all of your financial woes. Most
debt consolidators advertise a single monthly payment that is lower than your multiple payments
combined. When swamped with bills, that sounds like a great solution. Because you will be
paying less each month, you can use the rest of your take home income elsewhere. The cost to
you over the long term could be detrimental, though. Before you jump into a debt consolidation
loan, there are a few things to consider.
Before Signing for a Bill Consolidation Loan
By looking at what is available to you with your credit score and current debt you can get a
better idea as to whether a consolidation loan is a wise choice or not. Most creditors will try to
convince you that consolidating with them will save you time and money. This may be true, but
make sure before you sign on the dotted line. Check internet calculators to assess your debt and
speak with a wide range of lenders about your situation to get an idea of your options.
Do the Math
Will it really be beneficial for you to consolidate? Check the math and see with fees, a new
interest rate, and a new loan term how much more or less it will cost you over the life of your
loan to consolidate. Be especially wary of credit insurance or other monthly fees that sound
manageable, but could end up costing you more than your original debt over the long term. Be
especially conscious of these fees if you have mediocre or bad credit, as your credit score will
make you vulnerable to predatory lending.
Try to DIY
Try asking your current creditors for a lower interest rate yourself before you consolidate. You
may be surprised with the result, especially if you have good credit. Most credit card customer
service representatives can authorize an interest reduction over the phone. If you can’t get a
lowered interest rate, try to eliminate your overspending by taking your credit card out of your
wallet and creating a budget. Pay the minimum on most of your debt and make payments above
2. the minimum on your higher interest debt. Once you pay off your first loan, apply the money that
you were spending on that debt to the loan with the new highest interest rate.
Ask for Help
It can be very embarrassing to admit that you’ve gotten yourself over your head financially, but
you don’t have to face it alone. The National Foundation for Credit Counseling is a non-profit
that offers confidential services, some of which are free. You can also speak to trusted friends or
family members who might be able to help you design a fair budget, find creative solutions, or
hunt for extra work.
Debt consolidation can be very valuable, but you should use it prudently. Because it’s not a debt
solution, but a tool to help you manage your debt, there is potential for you to end up in deeper
debt or with your home at risk. To make the solution permanent, address the problems that led to
your debt and then decide if debt consolidation can help you. For more articles on Bill
Consolidation, visit Bills.Com