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Bill Consolidation Services Combine Several Debts

By Frank Jones on December 30, 2011

405572_2777-(1).jpgBill consolidation services offer to lower your payments by combining all your debts into a single loan. In some cases this can be helpful while in others it could put you in greater financial risk. Before moving forward with any bill consolidation service you should consider the risks and alternatives. Also, it's not a bad idea to consult non-profit organizations in your area who could provide sound financial advice.

Process


The process of bill consolidation is fairly straight forward when you think about it. A lender offers you a secured loan which amounts to your total unsecured debt while accepting some asset of yours as collateral. The most common unsecured debts include credit cards, utility bills, and other similar lines of credit. Most often, the collateral asset of choice is your home. This works to lower your payments and interest rate by reducing the number of fees which are charged on the debt and providing lower interest for the secured loan. Bill consolidation services can offer lower interest rates on secured loans because there is some asset they can collect if they do not receive payment.


Risks


Many lenders present their bill consolidation services as special promotions for military personnel or those with medical debt. Don't be fooled, they are all offering the same basic service. The major risk here is that you may loose your home if you are unable to repay the loan. This is important to consider if your bills have become too much to handle. Defaulting on some credit cards or falling behind on a few utility bills will not cost you your house because these are unsecured debts. They will effect your credit score and your ability to qualify for future loans, but they will not cost you your house. Once these bills have been combined through a bill consolidation service, they become secured by the collateral of your home. However, if you are sure you will be able to repay the debt, bill consolidation services are a good way to speed up that process by lowering your interest rates and payments.


Alternatives


Some alternatives to consider would include creating a budget, lifestyle changes, do-it-yourself debt consolidation, and even soliciting the advice of a local non-profit financial counseling service. Each of these options can help you manage your finances better while keeping you in your home. Also, if bill consolidation is required, the advice of a local non-profit financial counseling service could prove to be invaluable.
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