What is the difference between Bill Consolidation and Debt Consolidation?

In reality the process is very similar but the items that you consolidate will differ. Let me explain, with bill consolidation you will take all your outstanding bills and pay them off with a consolidation loan. Bills are generally very recent debt that you have acquired and find that you can’t pay them off immediately and also notice that they have a very high interest rate attached. With that knowledge you seek the consolidation loans immediately so that you can slowly settle your bills with a loan with reasonable rates.

Debt Consolidation however is slightly different. Instead of getting recently received bills to consolidate you will consolidate your old debts that seem to be giving you some trouble. These will most likely include your credit card bills, your personal loans or any other high interest financing products. The difference here again is the timing. Instead of getting a consolidation loan early on, you get it sometime down the road when the pain of paying the high interest finally settles in.

The key to both bill consolidation and debt consolidation is the interest rate and the tenure of the consolidation loan that you take out. All the bills that you have to your name will be replaced by a loan which settles the bills for you at the end of the month.  All you have to do is to keep up your end of the agreement. Settle your consolidation loan repayments on-time every month and you’ll have your bills settled in no time and a credit score improvement to boot.

Many people have a very negative impression on bill consolidation thinking it is an “end of the line” product similar to debt consolidation. This is not true. A smart person will use bill consolidation right from the start so they can easily pay off their bills successfully. There is nothing wrong with it and it actually shows that you are proactive in the management of your finances.

This however can’t be said about debt consolidation which is often regarded as an “end of the line” product. Most people who apply for it are one step away from declaring bankruptcy and looking for a way to settle their debts without filing for Chapter 17.

Bill consolidation loans don’t only come is one flavor and sometimes they aren’t even called that. Some lenders have a bad habit of calling these loans other thing just to confuse you. Some lenders will call bill consolidation loans as balance transfer loans or some other product related to bad credit. The bill consolidation loan will actually be a special low interest credit card with a high credit limit. What you have to do is to transfer the balance of whatever bill or debt into the credit card and make a monthly payment on the card.

You’ll have to be careful with these offers. Sometimes dodgy lenders will have the low rates expire after a few years so you have to be particularly careful here. Get all your debt paid off at the stipulated time or you’ll encounter high interest rates again and a chance for less than forthright lenders to profit from your situation.

Another way to do a bill consolidation loan is to get a home equity loan or refinancing that is equal to the total amount of bills that you’d like to consolidate. Once you get your loan approved, use the money to pay off your bills and slowly service your home equity loan like you would normally. Home equity loans are generally quite cheap since they are secured with your home and can have their terms made quite flexible depending on your credit history.