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Low-Interest Bill Consolidation Loans

Low-Interest Bill Consolidation Loans

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Betsalel Cohen
UpdatedMay 14, 2024
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    5 min read
Key Takeaways:
  • 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.

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.

Get a Personal Loan to Consolidate Bills makes it easy to shop for a bill consolidation personal loan. Start by filling in your credit score, zip code, loan purpose, and the amount of loan you need. Check out different offers and click on the appropriate ones.

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 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.

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 innovative Debt Navigator to find the best solution to your debt problems.

Debt statistics

If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q4 2023 was $17.503 trillion. Student loan debt was $1.601 trillion and credit card debt was $1.129 trillion.

According to data gathered by from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

The amount of debt and debt in collections vary by state. For example, in New Hampshire, 17% have any kind of debt in collections and the median debt in collections is $1672. Medical debt is common and 6% have that in collections. The median medical debt in collections is $500.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.



AAnonymous, Nov, 2018

Hey. Thanks for the great information about bill consolidation loans. I have credit card debt of around $20,000. My interest rates vary between 12% and 26%. Someone told me to do a snowball tactic, but it sounds like a bill consolidation loan would be cheaper. I have good credit and can afford high monthly payments? What do you suggest?

DDaniel Cohen, Nov, 2018

Please check out the personal loan rate table on this page and get a free loan quote. Compare how long it will take to pay the loan to how long it would take, making the same monthly payment you are quoted for the loan, to the time to pay off the debt making minimum payments to all creditors except your highest interest debt, sending that card all the difference between the loan payment amount and the sum of all the minimum payments. 

LLyle, Oct, 2011
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?
BBill, Nov, 2011
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.
ccharles, Apr, 2011
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
BBill, Apr, 2011
There is no one-size-fits-all answer to your question. See the resource What are my debt resolution options? to understand the different approaches to solving a debt problem that is causing distress.
ssajila, Feb, 2011
Hi Such a Nice Post.
jjoyce, May, 2011
I need to know how to get my bills consolidated.
BBill, May, 2011
I have two suggestions for you: 1. Enter your data into the 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 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.