If you have several debts and are having trouble making the minimum payments each month, debt and bill consolidation is often a good idea. For one thing, the interest rate on a consolidation loan is likely to be much lower than the rates you are paying on all your other debts right now. Some people find it helpful that they only have to pay one fixed monthly payment on their debt consolidation loan on the same day each month. This makes it easier for them to keep track of their money. Many people make late or missed payments because they have to keep track of multiple payment amounts and dates. This means they have to pay late fees, which adds to their debt. By getting a consolidation loan, you should not only be able to reduce your overall debt, but if you manage it well, you should also be able to improve your credit score over time and get out of the red and into the black.
When thinking about debt consolidation loans, there are a few things to watch out for. For example, if you don't have too much debt, it might be cheaper to sell other things you own than to pay off all your debts. You could also think about getting a new credit card with a low (or even zero) APR if you think you can pay off your current debts during the introductory period.
But if you decide that a bill consolidation loan is the way to go, there are other things you should think about as well. These can include how much you'll have to pay in total by the end of the loan compared to how much you're paying now. Yes, your overall monthly expenses may go down by a lot, but you need to think about how long you'll be paying back the loan and how much that will cost you over the course of the loan's life. Find out if there are any extra clauses, like payment protection insurance, and if there are any fees for paying off the loan early.
Try to get a consolidation loan with the lowest APR possible by shopping around, or hire a financial broker to do it for you. Many brokers have access to lenders that aren't available to the general public. Remember that a reputable broker won't charge you for this, because they get paid by the lender with whom they set up a loan agreement on your behalf.
If you don't think you'd be able to pay off a consolidation loan, you could talk to your creditors about lowering your monthly payments. This will show up on your credit report and hurt your credit score, but it may be the best choice for you depending on how bad your debt problems are.
And finally, there are two important things you should do if you decide to combine all of your debts. First, cut up all your credit and store cards so you can't use them to get into debt again. Second, learn to stick to a budget that you've written down and stick to it.
