What is a Bill Consolidation Loan? Should I Get One?

Bill consolidation loans are commonly referred to debt consolidation loans. The bill consolidation occurs when individuals combine all their bills together into one new loan. The importance of bill consolidation is that individuals can get rid creditors. Once the bill consolidation loan is taken out, the new lender pays off all the creditors. Thus, the individuals can focus on paying one lender instead of 10 to 20 creditors. When people pursue bill consolidation they are often behind in bill payments and receiving harassing phone calls and letters from creditors. However, bill consolidation may not be for everyone behind in their bills.

Bill Consolidation Is Switching Many Creditors For One, But The Debt Stays

When people are thinking about bill consolidation, they should consider the truth of consolidating their bills. Unfortunately, people remain in debt even after the creditors are paid. Thus, if people owe $20,000 in bills, the debt remains after the creditors are gone. Thus, unlike other debt management option such paying down bills or filing bankruptcy, debt consolidation doesn’t get rid of debt.

Types of Bill Consolidation Loans

There are a variety of bill consolidation loans which include secured, personal loans and account transfers. Home equity lines of credit, commonly referred to as second mortgages, is one type of bill consolidation loan. This means people place personal property such as home or rental property as collateral for obtaining the loan. Unsecured bill consolidation loans don’t require collateral. However, lenders may charge higher interest rates because they aren’t backed by collateral. Another type of bill consolidation is transferring payments onto a new credit card. The credit card often has a low introductory rate of approximately 1.9 percent, but can jump as high as 21.9 percent a month, according to Lending Tree.

Bill Consolidation Can Result In Additional Debt Or Loss of Property

The risk of bill consolidation loans is acquiring more debt or foreclosure if people miss or fall behind in payments. The worse part of foreclosure because of a bill consolidation loan is that it can occur when people are current on their first mortgage.

Seek Legal Assistance

Individuals thinking about bill consolidation should contact an attorney specializing in debt consolidation. The attorney can explain bill consolidation or debt management alternatives.

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