Debt and Bill Consolidation

Does paying one monthly payment instead of a group of smaller ones save money in the long run? This is the concept behind debt and bill consolidation and there are many people each month who depend upon it to keep them going. There is a lot of talk of debt and bill consolidation in the media, with offers on almost every channel. But, how does debt and bill consolidation work?

By looking at a scaled down example of how the process of debt and bill consolidation works, the benefits can be clear to see. Imagine having the following monthly payments:

Mortgage: $500
Credit Card #1: $150
Credit Card #2: $50
Car Loan: $300
Total: $1,000

Each of these bills has different interest rate, with the mortgage and car loan probably being lower than the credit cards by at least a few percentage points. Now, with refinancing the home mortgage and then taking out a home equity loan, which is one of the most popular means of debt and bill consolidation, the credit card balances can be eliminated completed, along with the outrageous interest charges. All of the money comes from the refinancing and/or home equity loan, which then is reduced to one monthly payment. This can save at least a few hundred dollars a month, depending on the interest rates, term and the amount borrowed for debt and bill consolidation. Who could not use anywhere from $100 to $300 in their pocket instead of paying creditors?

Debt and bill consolidation can make a huge difference in a household budget, but not before the consumer knows exactly how much is owed and what they are paying out each month. One of the unfortunate things that keep people in debt is that many are so afraid of knowing the truth; they can not get themselves to see the whole picture, and therefore are not able to even start getting out of the hole.

Do not be afraid of the looking at the whole thing. Because by doing so, debt and bill consolidation can make the big picture a little smaller and easier to look at each month.