Why does it seem so hard to consolidate my bills? This is a common question asked by many trying to find out more about debt and bill consolidation. Often, when asking the question “how can I consolidate my bills,” the majority of private debtors have no idea how to get started, thinking every obligation has to be handled independently. No wonder it seems so hard to get started figuring out how to consolidate your bills.
The Driving Need
Cash flow is the number one reason many need debt and bill consolidation. If a person doesn’t have an extra amount of cash flow each month and instead operates very close to income earned on each paycheck, multiple deadlines can be a huge challenge to manage. Further, when bills tend to fluctuate due to consumption and seasonal changes, a person can quickly find himself in a bad place.
Bill consolidation helps reduce the number of different deadlines a person has, improving cash flow my lumping together bills and their payment around the same time that the maximum amount of cash is available. Most people earn their income on a paycheck either once or month or twice month. By grouping different debt bills together into one or two loan payments, the billing can then be scheduled near those pay points, matching cash with bills due fairly closely.
Methods and Tools
There are different tools that can be used to consolidate your bills, depending on what you’re eligible for when asking how can I consolidate my bills:
- Lump Recurring Service Bills on a Credit Card – One of the easiest methods of debt and bill consolidation, credit cards are often used. Most people have a credit card as well as non-debt bills for services like utilities, home security, car insurance, phone service, Internet service, TV cable and more. All of these bills can hit on different dates, but a person can also pay them easily online with a credit card. Then, the balance of the payments can be paid in one lump transfer from a bank accounts at payroll time to the given credit card. A person just needs to make sure he has enough room on a credit card regularly to make the process work well.
- Debt and Bill Consolidation with Credit Card Balances – If a person has different credit cards, it’s a smart idea to see if one of the card companies would be willing to consolidate all the balances or most of them under one account. If a person has good credit, the card company will likely be cooperative and offer balance transfer checks to make the move possible. This in turn puts all the different balances into one credit card account, making it easier to handle with one recurring payment due each month.
- Consolidate your Bills with Consumer Loans – many banks offer different types of consumer loans to help consolidate outstanding individual debts. These are offered either as un-secured loans, which are hard to get unless a person has a very good credit score, and as secured loans. Secured loans simply mean that the funds borrowed have a collateral tied to them that the lender can obtain and sell if the loan is not paid back. Often, banks and lenders will advise customers to use their homes for collateral through equity lines of credit and 2nd home mortgages.
- Using Car Title Loans to Consolidate My Bills – leveraging a larger loan to consolidate your bills based on an owned car works the same way as a home equity loan or second mortgage, using the car as the collateral for the financing. If a car is entirely owned, it can be used via a car title loans to help create a consolidation loan, paying off lots of little issues and lumping them together into one, more manageable bill.
- Using Retirement Loans to Consolidate My Bills – If you have a 401K or IRA, you can borrow from the retirement account to consolidate your bills. However, the loan still needs to be paid back to the retirement account. If it’s not paid back, then the loan will become an early retirement account distribution, triggering tax penalties plus taxes owed, especially if the money is pre-tax retirement savings.
It’s important to remember that debt and bill consolidation doesn’t make the liabilities owed go away, except maybe in the case of the retirement account loan which instead triggers tax charges. The only benefit is usually better cash flow management. All the bills and debt will still remain owed, just to fewer accounts. Understanding this fact is critical because some tend to assume less bills are an improvement in less debt, getting themselves even further into new debt as a result.