Unveiling the Different Types of Bill Consolidation

billsDoes the term bill consolidation or debt consolidation ring in your ears? For some people, it is a good way to deal with all of their debt. On the other hand, some people think of it as a financial scam considering the fact that there are companies out there that charge their clients extremely high interest rates, making it difficult for the client to pay their loan. So, what is the real score when we talk about debt consolidation? Which side do we have to buy?

What Is Bill Consolidation?

Debt consolidation is the process of consolidating or grouping your debts into one single debt to make it easier for you to manage and pay. If you have different loans from different companies or credit cards, you can make it into one new loan. The balance of the new loan should equal the total of your three loans. Definitely, it is a simple process that helps you avoid paying too much interest by just focusing on one single interest rate. Nonetheless, despite its simplicity, there are still a lot of people who cannot completely understand what bill consolidation is and how it works.

How Debt Consolidation Works?

When we discuss about debt consolidation, it is important for us to identify which debt consolidation we are referring to. Well, there are different types of bill consolidation out there. If you really want to understand how debt consolidation works, then you must understand each of these types to avoid confusion.

1.)    Standard credit/debt consolidation loans

In this kind of loan, you will need a brand new loan from peer-to-peer lending firm, credit union or bank. They should agree to group all of your bills or debts into one new loan. This is beneficial knowing that the brand new loan’s interest rate is guaranteed to be lower compared to the interest rates you were being charged on your separate and smaller debts.

2.)    Home equity loans

Home equity loan is offered to those individuals who currently have a home mortgage. This loan allows you to borrow money against your home’s worth in order to pay your debts. It is guaranteed that it has low interest as well. Nonetheless, it has the risk of losing your home if you fail to pay your monthly dues.

3.)    Credit card balance transfer offer

This process involves transferring all your smaller credit card debts into one new credit card. This has a great advantage for those individuals who can guarantee the settlement of their debts within 12 to 18 months because the brand new credit card offers 0% interest for the first 12 to 18 months. After the 18th month, expect to see interests being added to your principal credit.

4.)    Student consolidation loan

Some people thought this is the same with a standard debt consolidation loan. However, the two are different things. The student loan consolidation is usually granted by the federal government. It is much more difficult to discharge this debt through bankruptcy. So, be sure that you can cover all the payments when you get this kind of debt consolidation or the federal government will have to seize your salary or wage if ever you decide to default your student loan consolidation.


A bill consolidation is a good thing as it helps you manage and pay all your loans in the most ideal way. However, if you choose the wrong company, then you might suffer from high interest rates that are impossible for you to afford. This is the reason why there is a great need to review the company and the debt consolidation service they are offering.

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