Consolidating all your bills may just be what you need to end your debt struggles. In a society that openly accepts and even encourages the use of credit, it is very easy to go over-the-top. Once you develop the habit of using credit, it can become addicting. After all, credit makes you feel like you have so much spending power. It allows you to acquire something even if you cannot afford to pay it in cash.
The convenience of a cashless transaction and the boost in spending power can easily lead you to open multiple credit accounts. Even if you are careful not to maximize your credit limit, paying all of the bills each month can become overwhelming. This is probably why some people find themselves wanting to consolidate their bills.
Can I consolidate all my bills?
If you are wondering if you can consolidate your bills – yes you can! In fact, you have a lot of options to do so. What you should probably look into is whether this is a great idea or not.
The thing is, there are so many options to deal with your debt situation. However, you have to figure which of the options suit your financial situation the best. Sometimes, you think that consolidating your bills is enough to help you solve your financial troubles. But in reality, it will not really solve the problem. There are so many things to consider when you want to consolidate the many bills that you have to pay each month. For one, you have to think about your financial capabilities. Consolidating your bills mean you still have to pay the same amount and no reduction will take place. Not only that, you have to check if your existing credit accounts can be consolidated. Some loans will require you to pay a prepayment penalty.
There are so many things to consider before you can finally decide if consolidating your multiple bills is a good idea. If you want an expert opinion, feel free to check with us if you qualify for debt consolidation. We have licensed debt experts who can talk to you about your specific debt and financial situation. The initial consultation is free and you will not be obligated to enroll in anything. You can hear out the expert opinion of our debt professionals and decide for yourself how you want to proceed.
How can consolidating bills improve my financial situation?
Before you consolidate your multiple debts, you need to ask yourself how this move will improve your financial situation. Here are the different ways that it can boost your finances.
- Simplifies your payments. First of all, it simplifies your payments. Instead of monitoring several due dates and payments, you only have to worry about one. Since everything is more simple now, you can focus your attention on other things – like finding ways to increase your income so you can eventually increase your personal net worth.
- Helps you avoid late penalty charges. One of the benefits of having only one payment each month is you will not miss a due date. There is only one to keep track of. You only have one payment to fund and that should not take too much of your time to do. Even if you are busy, it would be very hard to forget this payment. You can even set up an automatic payment and just make sure it is always funded.
- Organizes your repayment plan. Consolidating your bills is also a great way to organize your repayment plan. In fact, this is your chance to change something for the better. It can be to lower your monthly payment or to increase it so you can save more money. You can also try to negotiate for a lower interest rate to lower the cost of paying off the debt. Take advantage of the opportunities to change something about your repayment plan.
- Allows you to improve your credit history. Finally, all of these changes will help you improve your credit history. Since the repayment is easier now, you should not have a hard time paying your dues. That means you will not miss a payment. We all know that payment behavior is one of the biggest influence on your credit score. If you pay your dues well, your credit report will improve as you continue to pay off your debt.
Is it possible to consolidate my bills without borrowing money?
When you say that you have plans to consolidate debt, the first thing that comes to mind is to borrow enough money to pay off the existing ones. After that, you will be left with a bigger loan that you will focus on to get yourself completely out of debt.
While this is a good plan, it is not the only way that you can consolidate debt. In fact, there are two ways for you to consolidate bills without borrowing money.
Debt management. This is one of the options to consolidate your multiple bills. This involves a credit counselor who will discuss your debt and financial situation. You will both come up with a debt management plan or DMP. This is a repayment plan that is specifically created to suit your financial capabilities. If you need a lower monthly payment, this is what the DMP will give you. The credit counselor will present this to your multiple creditors and lenders for approval. Once approved, you will send a single monthly payment to the credit counselor – which is a total of all the monthly payments that you need to meet. The counselor will take charge of disbursing the money to the different creditors and lenders in your DMP.
Balance transfer. This is another option to consolidate your debts. This will not require you to borrow money. This involves a new credit card that offers a zero interest rate during the first few months. This is one of the ways that credit card companies encourage new clients to open an account with them. After applying and getting an approval, the creditor will arrange with your original creditors and lenders so your balance will be transferred to them. This will require you to pay a balance transfer fee. Once the transfer is done, you will be left with a single monthly payment because all your debts will be under one creditor. It is encouraged that you pay as much as you can while you still have zero interest on your transferred balance. All of your payments will be credited to your principal balance – which is a great way for you to aggressively pay off your debt.
If you want to consolidate your debts without borrowing money, these are the two options that you should consider.
What are the options to consolidate my bills?
Apart from debt management and balance transfer, there are other options to consolidate your bills. However, these are the options that will require you to borrow money. Here are the three options that you have.
Debt consolidation loan. This refers to an unsecured loan that is offered by lenders for the sole purpose of combining multiple debts into one. Since this is an unsecured loan, you need a good credit score to be given a low-interest rate. Once the lender approves of the loan, you need to provide them with details about your other debts. The lender will proceed to pay off the original debts – which is how the consolidation happens.
Personal loan. This is another unsecured loan that will help you consolidate debt. This is practically the same as a debt consolidation loan – except that it can be used for something else. The lender will give you the loan amount and you will be the one to disburse the funds to your original creditors and lenders. This is also a loan that you can get from family and friends – if you find one who will be willing to lend you money.
Home equity loan. This is the only option that involves a secured loan. If you own enough equity in your house that can cover your multiple debts, you can use this to consolidate your bills. Since you will be using your home as a collateral, this loan will have a low-interest rate. Of course, it will even be lower if you have a good credit score. You just have to be very careful with this option because if you fail to pay this back, you could end up losing your home in the process.
What are the steps to consolidate all my bills?
If you think that you want to consolidate your bills into one easy payment, you need to follow certain steps to ensure that you can set it up properly. Failing to follow one step could influence the decisions that you will make while consolidating your debts.
Here are the 10 steps that you should follow as you consolidate your multiple bills.
- Make a list of all the bills you will consolidate. Do not forget to include the due date, minimum payment requirement, outstanding balance, and other important terms of the debt. Take note that not all debts can be consolidated. While you will be focusing on the debts that you can consolidate, make sure that you continue paying for the others.
- Organize them according to type. The next step is to organize your debts. Group them according to the type of debt. For instance, what are the secured loans that you have? How many credit card debts do you owe? Grouping these debts together will make it easier for you to decide on the type of consolidation that you will use later on.
- Rank them from the highest interest rate to the lowest. With each group, try to rank the debts according to the interest rate. To be specific, you should rank them from the highest interest rate to the lowest.
- Come up with a list of your other expenses and rank them by priority. Once you are done dealing with your debts, you should look into your other expenses. After all, you have other financial obligations apart from your debts. You still have to pay these off. List these expenses and rank them according to priority. This will make it easy to remove the expenses that you do not need in case your finances fall short.
- Create a frugal budget. With the debt and expenses listed, you can now create a frugal budget. The truth is, any budget would probably be good enough. However, if you want to get out of debt quickly, you may want to live on a frugal budget so you can put more money into your debt payment fund.
- Calculate your disposable income – based on a frugal budget. Once you have your frugal budget, you can take your income and remove the expenses. What will be left is your disposable income. This is the amount that you can use to pay off your debts.
- Understand your consolidation options. The next step is to research the different consolidation options that you have. It is important for you to understand what each strategy entails – specifically the advantages and disadvantages. You need to be conscious of how each option can affect your financial future.
- Choose an option based on your ability to pay. Armed with your knowledge of your debt and financial situation and what you understand about your options, you should be able to choose the right debt solution. Do not forget to consider your financial goals as well.
- Ensure that your repayment and budget plan are aligned. After choosing the debt consolidation option, you have to make sure that the new repayment plan is aligned with the details of your budget plan. This will ensure that your payments will always be funded each month.
- Figure out what you need to improve to complete the repayment. Once all of this is done, you need to take one more look at your financial situation and the consolidation option that you have chosen. See if there is a way for you to increase your debt payment fund even further.
Do I need to hire a professional to help consolidate my bills?
Some people will think that getting a professional to consolidate their bills is necessary. This is not always the case. There are situations wherein working with a debt expert will be more beneficial than trying to work things out on your own. There are three important questions to ponder on when you are deciding if you will seek help or you will consolidate on your own.
Do you know what caused you to have multiple debts? This means you understand why you have a lot of debt without feeling confused about the whole thing.
Can you control your spending? Sometimes, people land in debt because they cannot control their spending urges.
Do you know how to consolidate your debts? If something confuses you, it is not really a good idea to proceed blindly. You have to stop and study your options and how you will consolidate debt. If you try to consolidate debt without fully understanding what is involved, you might end up wasting your time, effort and money.
If your answer to all three is yes, then you can consolidate on your own. You do not have to hire someone to assist you.
However, if your answer is no, then you need the help of a debt professional. At the very least, you need to get a credit counselor or debt expert who can make you understand the ins and outs of debt consolidation.
It really helps to read debt consolidation reviews. There are many of these all over the Internet. Focus on the forums and reviews that come from actual borrowers who have consolidated. Or you can look into trusted websites like the Better Business Bureau or Top Ten Reviews. You will be given an objective review of various debt experts who offer their services to consumers struggling with debt.