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Bill Consolidation

Consumer debt is rising rapidly in the UK and further a field. At the moment the amount of credit cards outnumbers people, whilst the total amount of debt is rising at a rate well above inflation. Solutions such as Bill consolidation and debt settlement are options that people are looking towards, as they fight to stay afloat and avoid bankruptcy.

Bill consolidation is quite simply allowing one company to handle all your payments on your behalf. You pay them, and they pay all your money off leaving you with less worries and hopefully a saving on the amount of interest you pay, whilst also gaining a more flexible repayment schedule.

But how do you know if bill consolidation is right for you? The first phase should always be to assess the kind of financial trouble that you are in. Consider adding all your income and subtracting all your outgoings to see if you are earning more than you spend each week or month.

If you are spending more money than you earn, then it is essential that you get on top of this straight away. Bill consolidation is a means of lowering the interest you pay and also changing when you pay, but with bill consolidation you will not save enough money to really change your cash-flow dramatically; that is why you need to change your payment habits.

The next phase should be to consider what kind of bill consolidation loan you would like to receive. It is possible to get an unsecured loan and secured loan depending on which you are applicable for. An unsecured loan means that should you go bankrupt you will not owe any money, however on the downside you will have to pay higher interest rates with an unsecured loan.

A secured loan means that should you go bankrupt the company giving you a loan of money will be able to claim your house from you, your car and any shares that you own in businesses. Should you decide to opt for a secured loan you will benefit from lower interest rates, but you will only be applicable if you own enough assets to cover your borrowing.

Many people ask as to how a bill consolidation company can charge less money than credit card companies but still make money. In order to explain this we have provided an example below.

John owes £10,000 across 3 credit card where the average APR or annual percentage rate is 15%. John approaches a bill consolidation company who offer John a secured loan of 10% over a five year repayment period. How can they pay off John’s debt and still only leave him owing £10,000 whilst he pays less interest? The reason is that they pay off John’s debts straight away and therefore they are effectively giving John a loan of £10,000 and they can choose a rate of interest that they consider being fair.

Don't make decisions for your future based on minimal knowledge speak to a professional debt management company

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