As per a recent survey by Charles Schwab, about 59% of Americans live a paycheck-to-paycheck life. Most Americans are struggling with basic needs and bills. In most cases, they have accumulated expenses and are desperate to pay their debts.

Do you have a similar problem too? If so, you could be considering taking a bill consolidation loan for you to solve the problem; you are in the right place. Below, you will find what you need to know about bill consolidation.

Consolidating your debts means that all your debts will be rolled up into a single monthly payment, whether loan payments or credit card bills. However, you should understand that a debt consolidation loan doesn’t erase your debt. In fact, after consolidating your bills, you might end up paying more. Before using a bill consolidation loan;

Carefully inspect your spending: You must understand why you are on loan to begin with. Have the debts accrued because you spend more than you earn? If so, a debt consolidation loan won’t help you off the debt unless you increase your income or make drastic changes to your life to reduce spending.

Create a budget: Can you pay off the existing debts by adjusting your expenses for a specific period? If so, adjust your budget to reflect what changes you can make.

Try Debt negotiation settlement with your creditors: Some lenders may accept lower minimum monthly payments, reduce the interest rates, waive certain fees or even change the monthly due dates to match better when you get paid, helping you pay back what you are owed. Considering your personal loan information or status, you can negotiate with your creditors personally or enlist the help of a company dealing with debt management.

Below is what you should know about bill consolidation.

Debt Consolidation Loan

Creditors like installment loan lenders, banks, and credit unions might provide debt consolidation loans, collecting most of your debt into a single loan. Ultimately, paying a single loan simplifies the entire process. Debt consolidation loans might also have lower interest rates than your current debts. So, what should you know about debt consolidation loans:

The debt consolidation might include costs or fees that you wouldn’t have paid should you have continued paying your other debts conventionally.

• Most of the lower interest rates for these loans might be teaser rates that last only for some time, after which the creditor might revise the rates upwards.
• Although the monthly payments might be lower, this might be because of a longer repayment period. Ultimately, this means you’ll pay quite a lot more when the period lapses.

Consider the interest rates and loan terms to see the amount of fees and interests you’ll have to pay if you consider a debt consolidation loan. This way, you can choose a loan that saves you the most.

Balance Transfers

Most credit card companies extend 0% or even low-interest rates on balance transfers to help you consolidate your debt into a single credit card.

This is what you need to know about using bill transfers to consolidate your bills.

• To begin with, you might have to pay a balance transfer fee. This is typically a fixed amount or a percentage of the total amount you are transferring, whichever is more.
• If you make purchases using the same credit card, you will most likely not have a grace period for the purchases. You’ll have to pay interest until after fully paying the entire balance.
• The rates of promotional interest in balance transfers only last for a limited period, after which the rate on your consolidated credit card debt might increase. Meaning you’ll pay a higher amount to pay.
• If you fall on payments for more than 60 days, the creditor might increase your credit rates on all your balances, the transferred balance included.

Whenever you opt for a balance transfer, ensure you don’t purchase using that card until you fully pay the transferred balance.

Home Equity Loan

This option involves borrowing against your home’s equity. When you use it for debt consolidation, the loan is used to repay the existing creditors. Then you can repay the home interest loans.

However, keep in mind that;

• Home equity loans might have lower interest than all the other loans.
• You might have to pay the closing costs with this option, which can be highly expensive.
• It is risky to use your home equity loan for bill consolidation. This is because you might be staring at foreclosure if you don’t repay the loan.
• By using the home equity for a loan, you could risk being “underwater” on your property or home if its value falls, making it harder to refinance or sell your home.
• When you use home equity for credit card debt consolidation, it might not be available for expenses like repairs or renovations or even in emergencies.

If you consider consolidating your bills to settle your debts, you should consider all the above issues before deciding on a strategy. Remember that the consolidated credit card debt might cost you higher fees and costs. The increasing interest rates may, at times might make the consolidated debt considerably higher. Now that you understand what you need to know about bill consolidation, choose one that works for you, considering your budget.