Arizona Tribune - How to Combine Your Bills and Conquer Your Debt

One way to step off that wheel is to combine your bills into a single, more manageable payment. Let's explore what it means to consolidate your bills, and how it might help you simplify your finances and take control of your debt.

What it means to combine your bills

Debt consolidation is a financial strategy where you combine multiple debts into one payment. This can make payments easier to manage because you only have to keep track of one bill. And if you move your debts to a lower-interest loan, you may pay less interest overall.

To be clear, you're not erasing debt. You're simply rolling it into one monthly bill. But the benefits - simplicity, predictability, and potentially more room in your budget - can make debt consolidation worthwhile.

5 debt consolidation options

There are a few common ways people combine their bills. Each has pros and cons, and some are considered safer than others.

Debt consolidation loan

A debt consolidation loan is a type of personal loan, often with a fixed interest rate. Fixed rates are important because they keep your monthly payments predictable, unlike variable rates that rise and fall with the market. Getting a loan with a variable rate means your monthly payments fluctuate with the market.

You need good credit to get the best rate, but if you qualify for a good rate, you may lower your interest payments. Plus, personal loans are regulated financial products offered by banks, credit unions, and reputable online lenders, which makes them a safe option.

Balance transfer credit card

A balance transfer card is another safe way to combine bills if you're careful. Essentially, you move other credit card balances onto a new card that doesn't charge interest for a limited time. That can save you interest if you pay the balance before the introductory period ends.

You can usually only move credit card debt to a balance transfer card, so this might not be the best choice if you have other debt, like student loans or medical bills. These cards can also have balance transfer fees - typically 3%-5% of the amount you move - that can chip away at your savings if you don't pay the balance down quickly.

Home equity line of credit (HELOC) or loan

Homeowners can borrow against their home's equity to pay other debts by getting a home equity loan or HELOC. Both can have lower interest rates and longer repayment terms than debt consolidation loans.

However, you're using your home as collateral, which can put your home at risk if you fall behind on payments. But if you're a homeowner with a steady income, tapping into your home equity can be a smart move.

Debt management plan

Debt management plans are usually offered through nonprofit credit counseling agencies. The agency negotiates a lower interest rate with your creditors and combines your debt into a single payment. Before enrolling, you may be required to meet with a certified credit counselor to review your finances.

The main risk here is that some for-profit companies claim to offer debt management plans. However, legitimate plans come from nonprofits and are accredited by organizations like the National Foundation for Credit Counseling or the Financial Counseling Association of America. Any company that claims it can wipe out debt or guarantees settlements is not legitimate.

Debt settlement companies

A debt settlement company is a for-profit business that typically asks you to stop paying your creditors and set money aside as it negotiates lump-sum settlements for less than what you owe.

But while the company negotiates, late fees pile up, interest grows, and your credit score may take a big hit. More importantly, creditors don't have to settle. You may wait months or even years only to find out the plan didn't work.

Tips before you combine

No matter which option you choose, combining bills needs to be done thoughtfully. These three tips can help you make the most of your plan:

• Avoid rolling in interest-free debt. Some debt doesn't accrue, like overdue utility bills and certain "buy now, pay later" plans. Combining it with high-interest debt may mean you end up paying more in the long run.

• Compare interest rates, fees, and repayment terms. Evaluating these three features can help you decide if the new plan is truly better or just looks easier month to month.

• Make a budget that accounts for your new single payment. Compare your new, single payment to what you were paying before and build it into your budget as a fixed expense.

Take the first step

Combining your bills won't erase debt overnight, but it may lighten the load and give you more control. Choosing the right method for your situation is the first step toward steady progress.

Sources

https://www.experian.com/blogs/ask-experian/what-is-debt-consolidation/

https://consumer.ftc.gov/articles/how-get-out-debt

CONTACT:
Sonakshi Murze
Manager
[email protected]

SOURCE: iQuanti

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P.A.Mendoza--AT