If you’re having a challenging time juggling your bills, you’re not alone. According to the U.S. Bureau of Labor Statistics, the average expenditure of a U.S. household was $61,334 annually. Of those bills, 9 of the 14 major expenditures rose in 2020 and continue to rise. With the rise in costs, people are looking for helpful ways to cut and consolidate bills. However, finding the best way to consolidate your bills isn’t easy.
Does Bill Consolidation Work?
Bill consolidation works as long as you don’t use the opportunity to spend more money. When you consolidate bills, you group enough of your bills together to make payments more manageable. Rather than working with different creditors, varying interests rates, and due dates, bill consolidation organizes it all into one fixed monthly payment, as you’ll learn at https://www.bills.com.
Step One: Start to Consolidate Bills
To consolidate bills, you must know the extent of your debt and how much income you have to meet those payments. You’ll have to list your credit cards, loans, and understand what their interest rates are. In addition, you’ll identify your sources of income and compare them to your monthly payments.
Step Two: Choose a Debt-Relief Option
Fortunately, there exists a variety of options to help you consolidate bills. The challenging part is choosing the right one for your situation. The following are the most common options for bill consolidation.
Balance Transfer Credit Card
A balance transfer credit card is a great choice for someone with a small amount of debt on high-interest credit cards. Credit cards with high interest rates can quickly drown you in balances if you’re not extremely careful. Data shows that 98% of credit cards charge hefty late fees and penalties. Using a balance transfer card to lower interest rates and make payments manageable work to consolidate bills from credit cards.
Bill Consolidation Loan
A bill consolidation loan is typically a personal loan from a bank. After taking out the bill consolidation loan, you would use the money to pay off the balance for credit card bills or other high-interest loans. The interest rates for bill consolidation loans rely on your credit score and you must meet the lenders qualifications.
Personal Loan from Friends and Family Members
Most people choose not to borrow money from friends or family members because it can risk relationships if things go south. That said, a personal loan from someone you know is an affordable way to help consolidate bills, especially if your credit is less than perfect. Making the loan more formal — by creating a promissory note, repayment plan, and even an interest rate — can help to make borrowing less from friends or family less awkward.
Home Equity Loan
If you own a home, you might have the option of using it to consolidate bills. A home equity loan uses your home as collateral for a loan. What makes home equity loans appealing are their interest rates, as they’re typically lower than those used for credit cards and car loans. Before looking into a home equity loan, however, you should know that defaulting could result in home foreclosure.
Debt Management Program
A debt management program is not a loan and you don’t need to put up your home as collateral. Rather, a debt management program helps your assess your finances, create a budget, and help you determine how to pay off your debt in a reasonable amount of time. Credit counselors answer your questions about the program and reach out to your creditors for you. The debt management program works with you to devise an affordable monthly payment, and they disburse these funds to pay your bills.
The Final Step: Making it Happen
Choosing a path to consolidate bills is a big step, but you don’t have to do it alone. If you’re looking for debt relief, Bills.com can answer your questions and help you choose the best way to consolidate your bills.