Consolidated bill paying generally means combining multiple debt payments, such as many credit card payments, into one simpler payment, according to Debt.org. A consumer initiates a new loan with an entity that pays off his current debts.Continue Reading
Consolidated bill paying can help consumers pay off debt faster with lower interest rates and lower payment amounts, explains Debt.org. Consolidation is often simpler because a consumer receives fewer collection calls, makes a payment to only one party, and has a better chance of paying on time, thus helping raise his credit score gradually.
Consolidation loans come in secured and unsecured variations, as stated on Debt.org. Lenders use an asset such as a house or car as collateral in secured loans. If a consumer defaults on a secured loan, the lender may take the asset. Secured loans are easier to qualify for and have lower interest rates but longer repayment periods that may add up to a higher interest cost.
For unsecured loans, lenders do not use collateral and instead give out loans based on a consumer's credit history, explains Debt.org. An unsecured loan tends to come with a lower interest cost over time because of the shorter repayment time frame, but it tends to have a higher interest rate. There is also no tax benefit, and qualifying for unsecured loans is more difficult.Learn more about Credit & Lending