Bill Consolidation Loans

Bill consolidation loans are the ideal way to organize your personal finances, and simplify numerous bill payments into one easy to pay loan. Many consumers find that they have a number of bill payments to make on a monthly basis, ranging from credit cards, auto loans, personal loans, and store cards. The interest rates and payments on these bills can soon mount up and leave an individual struggling financially.

Eventually, for many people, this is where a situation such as missed payments, defaults, and bad debts can take over their life. However, a great solution is to simply convert all of these credit accounts into one loan. A bill consolidation loan will not reduce the amount of debt you have, but it can make it far easier to manage.

However, simply consolidating all your monthly bills into one loan is not enough. The main reason consumers consider this option is because their debts are typically spiraling out of control, and therefore this is probably the right time to make some changes in the way one handles their finances. This may involve cutting back on expenses, ensuring that all bills are paid on time and in full, and placing a limit of excessive spending.

There are various bill consolidation loans for consumers to choose from and these include:

Secured loans – a secured bill consolidation loan will involve an individual providing some form of collateral in exchange for a loan. The most common type of collateral is typically real estate. This may include refinancing an existing mortgage in order to raise additional capital to pay off other unsecured existing debts.

Another option would be to obtain either a home equity loan or home equity line of credit. Both of these options can be considered as second mortgages, but are slightly different from each other. A home equity loan is generally a lump sum loan that is offered at a fixed rate and must be repaid over a set period of time. This will usually run in line with a first mortgage.

However, a home equity line of credit will work very much like a credit card. Once again, the loan is secured against your home, but a line of credit up to a certain amount will be offered. A consumer will only be charged interest of the amount of credit they withdraw, just like a credit card, and only interest payments need to be made. Once again, the term of this line of credit can run alongside your mortgage, although a larger lump sum payment may need to be made at maturity of this loan if you have merely made interest payments in the preceding months. A home equity line of credit is also usually offered at a variable rate.

Unsecured loans – An unsecured bill consolidation loan will not require the applicant to provide any collateral, and therefore this may result in a higher interest rate. It is also likely that much less funds will be offered with an unsecured loan, as a lender will typically perceive this as a higher risk.

An unsecured bill consolidation loan can come in the form of debt consolidation loan, a personal loan, or even a credit card with a high limit. Once again, this will allow for a number of bills to be converted into one easy to pay monthly loan.

There are certain factors that consumers should be aware of with either type of bill consolidation loan. A secured bill consolidation loan with see a borrower’s collateral put at potential risk. Should a debtor fail to make their payments, this could result in them losing their collateral, often their home.

An unsecured bill consolidation loan may not offer enough funds to consolidate all the debts that a borrower has, as lenders are likely to limit the total loan offered. This, of course, could leave a borrower in a fairly similar situation, and therefore they may be no better off.

Even so, bill consolidation loans are a fantastic solution for people who believe that their monthly bills are beginning to get out of control. It is generally a lot more difficult to stay in control of a number of debts that are with numerous creditors. This will mean that different payments will typically need to be made on different days of the month, and therefore this is a lot harder to budget for. However, having to only ever worry about one single payment on a monthly basis, with the knowledge that this will cover all your bills, can make life a lot easier.