Low-Interest Bill Consolidation Loans

Highlights

  • Bill consolidation loans combine your monthly payments into one affordable payment.
  • If you have good credit then you can obtain a low-interest bill consolidation loan.
  • There are different types of bill consolidation loans. Choose the one that fits your situation.
4.6
/5.0
(19 Votes)

Bill Consolidation Loans - Low Interest and Affordable Payments

Bills can pile up. For some of us, it can quickly reach an unmanageable point. Sometimes the easiest way to pay our bills is to use our credit cards. If the amount you charge on your cards is more than you are paying, your balances can become enormous before you know it. If your cards carry high interest, too, it can be tough to dig yourself of out the hole.

There are various ways to get out of debt. One popular method is a bill consolidation loan. While low-interest personal debt consolidation loans are available, you will need excellent credit to get the best rates. Another popular solution is a cash-out refinance or a home equity loan, which is possible to obtain with a less than stellar credit score and offers low-interest rates and low monthly payments.

Low-Interest Bill Consolidation Loan

The most common type of a bill consolidation loan is a personal unsecured loan. In general, the better your credit score, the lower your interest rate. Bill consolidation personal loans are paid off between 2-5 years. If you qualify for the best terms, then you can save a lot of money. You might even be able to combine those savings with a lower payment.

Here is an easy example to show you how much savings you can get in a low-interest bill consolidation loan. Let’s say that you have $25,000 in credit card and other bills and your average interest rate is 19%. Your monthly minimum payment would be about $500, or 2% of your debt. If you decide to continue to make the same monthly payment instead of decreasing minimum payments, then you will pay off the loan in about 67 months, and your total scheduled interest payments would be about $7,382.

However, if you qualify for a low-interest loan, you could save thousands of dollars. By consolidating your $25,000 into one monthly payment, your savings (not including any origination fees would be):

  • $6,157 on a 3-year loan at a 6% interest rate. Your monthly payment would increase to about $728.
  • $3,925 on a 5-year loan at a 10% interest rate. Your monthly payment would drop about $25 to $475.

Personal Bill Consolidation Loan Calculator

Calculate Monthly Payment of Personal Loan

Other Types of Bill Consolidation Loans

Besides unsecured personal loans there exist different types of bill consolidation loans. The two most common are cash-out refinance loans and home equity loans (or home equity lines of credit). Other possibilities include a balance transfer loan or a 401-K loan.

The main advantage of a mortgage loan is that you can get lower interest rates and a longer payment term, which translates into an affordable monthly payment.

Cash-Out Refinance vs. Home Equity Bill Consolidation Loan

If you have built up equity in your home, then you can consider refinancing your mortgage.

In general, lenders will allow you to take out cash in your home up to 80% of the value of your home. For example, if you have a home worth $300,000 and your current mortgage is $200,000, then you can take out an additional $40,000 to pay off your bills. (80% of $300,000 = $240,000).

It is possible to take out a mortgage for as long as 30-years, or if you can pay more, then consider a 15-year mortgage at lower interest rates. The main advantage of a cash-out mortgage is lower interest rates, or for some borrowers the reduction in monthly payments. The main disadvantage is high closing costs. It is essential to consider the overall benefits from the lower interest rate, lower monthly payment and the amount of time you hold on to the mortgage loan.

A home-equity bill consolidation loan allows you to hold on to the original mortgage. The home equity loan (HEL) or home equity line of credit (HELOC) creates one additional mortgage loan that allows you to pay off your bills. The main advantage of this loan, assuming that your interest rate is attractive and your monthly payments are affordable, is that you pay much less in closing costs.

Cash-Out or Home Equity Bill Consolidation Loan

Do you have equity in your home? Are you looking for lower monthly payments? Can you reduce your interest rates? Check out a cash-out or home equity bill consolidation loan. Get a quote from a Bills.com mortgage provider.

Balance Transfer Loan

If you have multiple credit cards and a few other small debts, you can use a balance transfer offer to combine all your debts into one low-rate or zero percent interest credit card. Just make sure you can pay off that card before the low rate expires. Some cards return to a very high rate after the offer expires and you may not qualify for another offer from a different bank. When considering a balance transfer, be sure to carefully review the balance transfer fees. If they are more than 3%, look for another offer.

401(k) Loan

A 401(k) loan, if allowed by the rules of your 401(k) plan, is a withdrawal from your account that you repay with a modest interest rate. The interest paid goes to your account. In other words, you pay yourself the interest. There is no tax consequence for a 401(k) loan that is repaid. The risk of a 401(k) loan is the tax penalty you must pay if something prevents you from repaying the loan as agreed. Consult with your 401(k) administrator to learn your plan's qualification rules.

Get a Personal Loan Quote from FreedomPlus

If your credit isn't excellent but is improving, see if you qualify for an unsecured personal loan from Freedom Plus.

Low-interest Bill Consolidation Loan Alternatives

Are personal unsecured or mortgage bill consolidation loans the best alternative for all households? The obvious answer is no. If you don’t have good enough credit to qualify for attractive rates, enough equity in your home to take out a mortgage, or are in financial hardship and can’t afford the monthly payments; then a bill consolidation loan is not a good solution.

Fortunately, there are other debt relief solutions such as credit counseling, debt settlement, and bankruptcy that allow you to find an affordable monthly payment and reduce your debt.

Check out Bills.com innovative Debt Navigator to find the best solution to your debt problems.

Get Debt Help!
4.6
/5.0
(19 Votes)

People also like to Read

Betsalel Cohen

Consolidate My Bills | Review the options available to consolidate your bills, such as debt consolidation loans, debt managem... Read more >>

Betsalel Cohen

Bill consolidation programs exist for those in a financial hardship. A personal loan isn't an option if you have poor credit ... Read more >>

Bills.com Team

There are many different forms of consolidation and each of them have varying effects on your credit rating. The main types o... Read more >>

10 Comments

Recent Best
1500 characters remaining
  • LH
    Oct, 2011
    Lyle
    Braham, MN
    We have $10,000 (with a rate of 4.5% until paid off) in credit card debt and We owe $12,000 (with a rate of 7.8%) on my car. We have great credit (over 800) is it worth it to try to consolidate these bills into one? With the housing market the way it is we owe more on the house than it is worth, so we can not get a home equity loan or refinance it. We sometimes get a little short on cash. Where is the best place to get a loan if you think it would be better to consolidate?
    0 Votes

    • BA
      Nov, 2011
      Bill
      As you have excellent credit, I recommend looking for low interest or 0% interest balance transfer offers. The 4.5% is a pretty low rate, so only transfer a balance as large as $10,000 to a 0% if you are confident that you can pay off the debt within the time that the low-interest rate stays in effect. If the rate rises significantly after the teaser period, you could be better off staying put at the fixed-rate 4.5% you have.

      You can look into refinancing your car loan. Credit unions often have excellent rates for auto loans, so start your shopping there.

      Lastly, look into a HARP refinance for your mortgage. You won't be able to take cash out, but you could lower your monthly payment and improve you cash flow, easing the strain to pay your other bills.
      0 Votes

  • CF
    Apr, 2011
    charles
    Hoffman Estates, IL
    I have about 40,000 in credit card debt due to unemployment over the past year. I am employed now, but banks are unwilling to offer any consolidation loans, even a home equity. I always pay my bills, I just want to consolidate 4 credit cards. I don't know how to bring down essentially old debt if I can't get a consolidation loan
    0 Votes

    • BA
      Apr, 2011
      Bill
      There is no one-size-fits-all answer to your question. See the Bills.com resource What are my debt resolution options? to understand the different approaches to solving a debt problem that is causing distress.
      0 Votes

  • SW
    Feb, 2011
    sajila
    Schenectady, NY
    Hi Such a Nice Post.
    0 Votes

    • JM
      May, 2011
      joyce
      Dunn, NC
      I need to know how to get my bills consolidated.
      1 Votes

    • BA
      May, 2011
      Bill
      I have two suggestions for you:
      1. Enter your data into the Bills.com Debt Coach for a personalized, interactive review of your debt resolution options. This will help you choose the debt resolution strategy that is right for your unique circumstances and goals.
      2. Complete the Bills.com Savings Center form to receive a no-cost, no-gimmick quote from a pre-screened debt resolution provider.

      Let us know how you decide to resolve your debt issue.

      0 Votes

  • NK
    Nov, 2010
    Nick
    Is a bill consolidation loan preferred over a low interest balance transfer offer?
    3 Votes

    • BA
      Nov, 2010
      Bill
      Santa Barbara, CA
      Low interest loans are preferred because low interest balance transfers often are only introductory rates for short periods of time. Also if a payment is late/missed on an introductory rate often the interest rate will balloon to a much higher rate.
      5 Votes

    • FT
      Sep, 2011
      Fredric
      Chickamauga, GA
      If the loan is up side down to the housing drop then who do you think is going to give you a chance , which is not your fault.
      0 Votes

loading...