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What to Look For in a Bill Consolidation Loan

Much like anything worth doing, you'll get out of a bill consolidation loan what you put into it. So before signing any agreement, be sure to take a hard look at your current financial picture. Review your entire situation including your income, savings, and all debts, research consumer finance companies and the bill consolidation loans that they offer, and consider your future financial goals and how you plan to achieve them.

When you're in the market for a bill consolidation loan, it can be tempting to sign up for a product that promises a quick and easy way out of debt. But it's important to remember that becoming debt-free is neither quick nor easy - it takes a lot of hard work and discipline to get your finances back on track. Watch out for the scams that some companies advertise and instead partner with one that has a long history of successfully getting consumers out of debt. Start your research by reviewing companies' listings with the Better Business Bureau. Next, learn more about Debt Relief Solutions and How to Avoid Scams.

Choosing the Best Debt Consolidation Loan

Armed with this information, you're much more likely to choose the best bill consolidation loan for your individual needs. And once you've narrowed your choices down to one or two companies, be sure to ask question about the following features of your loan:

  • Interest rate - Most bill consolidation loans will offer a lower interest rate than you're paying on your existing debts. Ask what the interest rate is and confirm that it cannot change over the life of the loan.
  • Monthly payment amount - Before signing any agreement, make sure you know how much you'll be responsible for paying each month, and that you feel comfortable you can afford it. Your monthly payment to the lender should be less than you were paying to all of your creditors.
  • Monthly savings - For most consumers who consider a bill consolidation loan, they're unable to make all their payments every month. So be sure the new loan offers you savings over your current, total monthly payments.
  • Total interest payments - Along with the interest rate, monthly payment amount and monthly savings, you should know the total interest you'll be paying on the new loan. While the amount may seem high, remember it's still likely to be much less than the interest you would've paid had you continued to pay all of your creditors individually - especially if you were only making minimum payments. You may be able to reduce the amount of interest you pay through an alternative payment plan, which sometimes allows you to pay off your loan early.
  • Due date - Some companies will offer some flexibility around the due date of your bill consolidation loan. If you're paid twice a month - for example, on the 1st and 15th - you may ask to set a due date that follows your paycheck's schedule so you're sure to be able to make your payment every month.
  • Repayment term/Payoff date - The company should be able to tell you the exact terms of your bill consolidation loan; they'll typically provide it in months (i.e., 36 months rather than 3 years). Make sure you're comfortable with the length of time you'll be paying back the loan.
  • Alternative payment plans - In addition to offering flexible due dates, ask the company whether they offer alternative payment plans, such as weekly or biweekly payments. Many consumers find it's easier on their wallet to spread payments over two or more per month, rather than owing it all at once. This may also help you to pay off the bill consolidation loan more quickly. Be sure to ask how an alternative payment schedule will affect the interest you pay over the life of the loan.
  • Prepayment penalty - Look for a loan that doesn't charge a prepayment penalty for paying off your bill consolidation loan early. A good company that looks out for consumers won't charge a fee for an early payoff, as their goal is to help you get out of debt as quickly as possible.
  • Customer service number - A reputable company in any industry will offer you ways to get in touch with them to report problems with your bill or ask questions about the product or service. Find out how to get in touch with the company handling your bill consolidation loan and whether you're assigned to a specific loan representative. Then make sure you keep all phone numbers, email addresses and the company's website accessible, in case you have questions or concerns.

Looking for an alternative to bill consolidation loans? Providers of CareOne Debt Relief Services offer multiple debt relief options that may better suit your financial needs.

Our Debt Management Plan (DMP) may help you pay off your unsecured debts, including your credit card debts, in full in five years or less. By consolidating your debts into one, simple monthly payment, the DMP may offer significant savings in both interest and repayment terms. Read more >>

CareOne also offers a Debt Settlement Plan (DSP). With debt settlement, we will work with you and your creditors to negotiate to pay back a portion of your unsecured debt. With a DSP, you'll make affordable monthly deposits into a trust account. This type of debt relief plan will have a negative impact on your credit, so it's important to discuss this and all options with a qualified representative. Read more >>

For more information on alternative options to bill consolidation loans, browse our helpful resource guides. You'll find advice and insight from consumers just like you.

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