What is Bill Consolidation?
There are many
companies out there offering "bill consolidation,” also known as
Bill Consolidation, Bill Management, bill consolidation Loans, Debt Management
Plans, Credit Counseling, Credit Management or Debt Elimination. These companies
make many claims that seem almost too good to be true but that are reality for
the right candidate:
- Consolidate your debts
into one low monthly payment.
- Reduce your debt by
40%-60%, in some cases even more.
- Eliminate interest and
late fees.
- Stop harassing and threatening
phone calls.
- Get out of debt in a
fraction of the time.
- Rebuild poor credit
We are dedicated to helping you sift through bogus claims some of these companies
make to find the real benefits that they can provide. Sometimes a bill consolidation
company can provide great peace of mind. Hopefully this article will assist
you in making a better decision in choosing a company to help you solve your
debt problem.
There are two major categories of debt assistance: Debt
Consolidation and Debt Negotiation.
Each of these can be broken down into several other sub-categories. This section
talks about bill consolidation.
Simply
put, a bill consolidation service has preset arrangements with almost all of
the major creditors, mostly credit card companies, and some medical & collection
companies. These agreements allow bill consolidation companies to grant its
customers access to much lower interest rates on unsecured debt that the customer
has piled up. These interest rates are pre-negotiated for people that use the
bill consolidation services and have those same companies as creditors. When
you call a bill consolidation company they reference this pre-negotiated creditor
interest rate sheet and then give you a new payment based on the lower interest
rates they have negotiated with that particular creditor. Typically this payment
is lower than the rate most credit card companies offer the public and more
often than not will save you money on your monthly credit card bills and simplify
your payments if you have multiple creditors.
One caveat of the bill consolidation plan is that you must cancel any and all
cards you include in the program so that they can be paid off. You may wish
to exclude a card for emergencies, depending upon the policies of the bill consolidation
company you choose to work with.
One benefit of the bill consolidation Program comes into play if you are behind
on payments and are getting harassed by your creditors. If you can make the
new, lower monthly payment, the bill consolidation company will stop the creditors
from calling you and keep them satisfied in the interim.
The payments are usually setup to last four to eight years but statistics have
shown that there is a significant fallout on bill consolidation programs due
to unrest, changing situations, and poor customer service. So, to get the greatest
benefit from a bill consolidation program, make sure you are committed to utilizing
this innovative solution for the long term.
Expect to pay two types of commissions to a bill consolidation company. The
first type is roughly your first payment you'd make toward the program that
does not go directly toward your creditors but gets the wheels of the debt management
company turning. The second type is a monthly administration fee. For example:
Say you owed $10,000 in credit card debt and your existing payment you were
making was $350. With the lower interest payments that can be secured from creditors
by bill consolidation companies, the bill consolidation company got you to $250
per month, a $100 "savings". You then would make a payment in the
form of a monthly draft out of your checking account for the $250. Typically
this doesn't cover a payment to your creditors so you'll need to cough up another
$250 that month to pay your creditor bills.
The administrative fee pays the people at the bill consolidation company that
deal with your creditors and keeps the program running. It is compensation to
the bill consolidation company for getting your interest rates and monthly payments
reduced. Monthly “admin” fees of different bill consolidation firms
range all over the board. Some charge a flat fee anywhere from $10-$40, others
charge a per creditor fee of $5. Either way, you're paying about $30 per month
that doesn't go toward your debt.
You might be wondering which types of people will benefit financially from a
bill consolidation program. A bill consolidation Program significantly benefits
those who have very high interest rates (above 18%), have more credit card bills
then they can keep up with, or would just like the simplicity of one payment
to one company for all of their unsecured debt.
If you would like a free quote from a company similar to the ones mentioned
above, click
here or call 1-800-646-2993.
