Are you looking for relief from your piling debts? Nothing can be more distressing than having a growing financial liability. If you are already feeling the heat, it’s time you opt for a solution, such as debt management. It enables you to combine all your bills into one single monthly payment and clear it either through a loan or a debt management scheme. Generally, people resort to this method when they end up accruing an enormous amount of debt on their high-interest rate credit cards because it promises to bring down their monthly payables by offering lower interest rates and organizing their debt payments.
So, if you are bothered by the number of bills that you have to pay every month to different card companies at a varying deadline, then consolidating the bills can be a practical solution for you as it involves one creditor and one payment every month along with a saving opportunity. You can pay your debts under this method through either of the two ways as mentioned above, by taking a loan or subscribing to a debt management plan without a loan. It’s up to you to decide which option is more suitable for your need.
What do you need to do to consolidate your debt?
The only time you can say your debt consolidation efforts have been successful when your interest rates go down and also your monthly bill payments to an affordable limit on credit cards. For that, it is necessary for you to be aware of the total bill amount that you have to clear every month for all the credit cards and the interest rate that you pay on each of them on average. It can help you compare which is your high-interest card and which is lower and what you can do with them to manage your payment.
Additionally, you can also review your budget plans for every month that include food, energy, transportation, and housing costs as well to have a fair idea about savings you can make at the end of the month.
Ideally, adhering to a planned budget and making timely credit card payments can be sufficient for you to lead a debt-free life. But, sometimes, even budgeting and controlled spending look like a distant possibility. In that scenario, a loan or a debt management scheme can be a savior. Both of these help you to organize your monthly payments into one and see your debts reduce over a while.
Taking a loan for bill consolidation
One of the most popular ways of credit consolidation is taking out a loan from a bank, a lender or any other financial institution. The amount of loan should cover all your debt at once. There will be monthly installments that you will have to pay every month to repay the amount to the lender.
Typically, you get 3 to 5 years to pay it off. The installments include interest charges as negotiated with the creditor. How much interest rate you will have to pay depends on the health of your credit score, which can be negatively affected if you fail to pay your credit card debt.
In the case, you don’t get the lower interest rate, or it is comparative to the amount you have been paying on your cards, then it is better not to walk down this path. Look for instead personal loans or home equity as an alternative. However, here again, you need to consider two factors – interest charges and the period of loan repayment.
Consolidating credit cards debt through a debt management program
You can merge your debts into one monthly cycle without resorting to the option of loan also. For that, you may have to approach credit counseling companies for a debt management program. You don’t have to take any loan. The agency will coordinate with your credit card providers for negotiating the interest price and the monthly payments. It can also help you bring down your late fee penalties and over-the-limit charges by talking with the credit card firms. Once everything is determined, you will send one single payment to the agency every month, and it will then disburse the amount to respective creditors.
Since this process is quite long as it may need about 3 to 5 years to get you rid of the debt, you may hesitate to choose it as an option. Also, there is another risk. Failing to pay even once may cause to roll back all the concessions that you received after negotiation.
Is credit consolidation a suitable solution?
Bill consolidation can work best only if you are determined to change your spending habits. Otherwise, it will yield no results. For that, you would need to take note of a few things diligently. Here is a look at them:
- Reduce dependency on the usage of credit cards
- Make a budget and adhere to it
- Check whether a new loan can cover all your debts
- Calculate how much you can save after joining a debt management process
For a more in-depth insight into bill consolidation, you can check a reliable and specialized website like Nationaldebtrelief.com.
Sometimes, people find it difficult to decide whether the idea of consolidating debts will be meaningful for them. If you are also in this same position, reckon your current circumstances. Is the balance on your credit card rising beyond your control? Are you anxious? If this is the situation, then opting for bill consolidation makes a good sense. It can help you regain your financial strength or at least put it back on track over time. There are many Americans who are turning to this method to protect themselves from the economic woes and curtailing their dependence on credit cards, becoming more responsible with their hard-earned money.
With the help of bill consolidation, you can simplify your monthly payments, thereby getting more organized. You can get back your finances in good shape soon, which will ultimately have an impact on your credit score as well. However, do make sure to research and weigh your options well before jumping the gun.