Guest Post by Brad Swain
Bill consolidation, or debt consolidation, is the process of combining loans such as auto loans, mortgages, and credit cards into a single fixed-term loan. This allows you to make one monthly payment to one creditor instead of making multiple payments to many creditors. Loan consolidation can be beneficial in a variety of ways in 2012.
Why consolidate my bills?
Having separate loans to pay and keep track of can be both expensive and confusing. Consolidating your bills can save you substantial amounts of time and money.
Bill consolidation offers two major money-saving advantages. First, it can significantly reduce the high interest rates you may be paying on your existing individual loans. This may save you considerable money over time.
According to the Bureau of Labor Statistics, interest rates on auto loans and mortgages are at an all-time low. For instance, auto loan rates for used cars dropped from 7% in 2008 to 5.48% in 2011. So people seeking to consolidate used car loans, mortgages, and credit card debt in 2012 may be getting a good deal.
The second money-saving advantage of bill consolidation is the ability to pay off debt faster. Paying off a loan quickly prevents unnecessary interest accrual, saving you more money in the long term.
Additionally, debt consolidation saves you time, by giving you a single creditor to pay each month. This spares you the burden of having to sort through stacks of paperwork, or needing to mail different bills at different times of the month.
How do I consolidate my loans?
A good first step is to visit your local bank or credit union to inquire about debt consolidation. Credit unions usually offer the best rates – but often require you to be a member. You can easily research online to find current local interest rates.
If you’re having a hard time getting a bank or credit union to help you, it may be due to the amount of debt you have or your credit score. However, some banks will still work with you despite your credit issues. If not, you may want to consider working with a finance company. While you may not get the same great rates a bank or credit union can offer, working with a finance company can still be beneficial. Just beware of higher interest rates, longer loans, and hidden fees. Finance companies should only be used as a last resort, since they can adversely affect a future creditor’s perception of you.
Consolidating your loans can be a big step in the right financial direction in 2012. If you shop around and choose carefully, it just might become the best decision you make in the New Year!