Consolidation or settlement – Which is the best option to manage outstanding bills?

What is bill consolidation?

Bill consolidation is an option to consolidate your bills into one single, monthly payment. By using this option you can consolidate all your monthly bills such as utility bills, unsecured debts such as credit card bills or medical bills, payday loans, private student loans, personal loan payments, and other unpaid debts.

Is bill consolidation a good idea?

Word ‘bill consolidation’ or ‘bill debt consolidation’ are focused on paying off your liabilities and consumer debts through an easy, affordable monthly payment. Through bill debt consolidation you may lower your multiple bill payments by a month. Apart from that, you may get favorable repayment terms such as lower interest rates, lower monthly payments, or both. You may consolidate all your bills into one without damaging your credit score, as you are paying all of your liabilities in full.

However, a bill consolidation option is suitable for you, if you choose the perfect consolidation method and consider your financial situation properly. A balance transfer method or bill consolidation loan may give you relief initially. But if you have financial difficulties for a long time, in the long run, both options might become costly for you. However, if you take help from a bill consolidation program, it would help you to reduce your financial stress as well as lower your monthly payment.

Your financial condition also plays an important role to choose a perfect bill consolidation method. No matter which option you choose, you must consider how much you can afford to invest in bill consolidation every month. You must also ensure it doesn’t hamper your household budget and incur more debts.

If you’re having issues managing your bills properly, then bill consolidation would be your first choice. You have the chance to attend no-obligation free counseling, provided by a debt relief company, which will help you to decide whether or not you should consolidate your bills or look for any other ways.

How Bill consolidation works

Let us know how the bill consolidation option can get you out of debt and offer you relief from the following bills:

a) Utility bill consolidation

You may get rid of your utility bills through the bill consolidation option. The process is similar to any other bill consolidation strategy. Utility bills may include your unpaid bills for gas, water, sewer, electricity, rent, technical utilities, trash recycling, etc. You may choose any of the available bill consolidation options to consolidate all your bills into one payment within a definite time period of each month.

b) Medical bill consolidation

The perfect method to deal with hospital debt is bill consolidation via enrollment in a medical bill consolidation program. This program will offer you a way to get rid of unpaid medical bill debts with the help of an affordable repayment plan. You may search for the best medical bill consolidation program online.

You may also take out a personal loan or bill consolidation loan to pay off your medical bills.
Before opting for medical bill consolidation, make sure you consider the cost of the medical bill consolidation program, the exact time to get rid of the medical debt, and your financial status.

c) Credit card bill consolidation

Credit card bill consolidation is an option to consolidate multiple credit cards through one monthly payment. Practically, the new debt should carry a low APR compared to the rates on your existing credit cards. Lower interest-rate, affordable payment options, and flexible payoff periods are among the most important benefits offered by credit card bill consolidation options.

The most effective ways to manage credit card bills are:

  • Consolidate with a personal loan or credit card bill consolidation loan
  • Use a balance transfer credit card
  • Sign up for a bill consolidation program

Credit card bill consolidation may hurt your credit score if the lender runs a hard inquiry.

However, your credit score will drop only a few points which will gradually increase as soon as you pay off all the credit card bills.

d) Retail store card bill consolidation

This somehow works similarly to a credit card bill consolidation method. Normally, retail credit cards are issued by a finance company that collaborates with the store and provides you good discounts and offers. Any bills you owe are held by the finance company, not the store.

If somehow the store drops their curtain, the bill you owe is still due to the finance company. You have to communicate with the finance company regarding your payments.

You’ll receive monthly statements and bills until the balance is paid off in full. So, you shouldn’t take it lightly and choose any of the bill consolidation options to manage this debt. The preferred option is a balance transfer if you can afford the payments later.

Now, let us discuss the second option which is the bill settlement option.

What is a bill settlement or debt settlement?

Bill settlement is a process where you can settle your outstanding bills by paying less than what you owe. Generally, you may have to take help from a trust-worthy debt settlement company to send a bill settlement letter or you may negotiate with the creditors on your own. If the negotiation works well, you may cut down your outstanding bills. If the creditors won’t accept your offer, or deny all the bill settlement letters provided by you or the debt settlement company, then you may think of filing bankruptcy. Normally creditors accept billing and settlement offers as they would want to recover as much money as they can from you.

How does a bill or debt settlement work?

Debt settlement comes in handy only when you have many late payments or haven’t paid any payments for more than 3 months. These bills or debts might probably go to collections and a collection agent may call you to recover the bills. If you choose to negotiate all by yourself, then you must convince the creditors or collection agency that you are no longer in shape to afford such bill payments. A creditor or collector will not accept your bill settlement offer if they notice that you can pay the full amount that you originally agreed to.

Send a bill settlement letter to the creditor or the collection agency, and inform them that you can’t pay the bill at all. You may ask for a settlement offer or provide an offer from your end.

If you decide to take help from a debt settlement company, then you should talk to the company and provide your financial details. The debt settlement company will negotiate with creditors/collection agencies to reduce your bills. Most of your bills may include unsecured debt such as utility bills, medical bills, credit card balances, etc. No secured debt with collateral can be settled. Also, you can’t settle federal student loans with the help of a debt settlement program. If you’re struggling with your private student loans, then you may settle them through a bill settlement option.

In a bill or debt settlement program, you need to pay a certain amount to the debt settlement company per month. The company will create a trust account for you where the money will be deposited. Once you save a decent amount, and the company receives a suitable settlement offer from the creditors, they will initiate the settlement process. During that time, no collection calls will harass you anymore.

Bills that can be settled through a bill or debt settlement option are:

  • Utility bills
  • Medical debts
  • Credit card bills
  • Unsecured loans
  • Personal loans

Let us know how the bill settlement program can get you out of debt and offer you relief from the following bills:

a) Utility bill settlement

You have to list all the utility bills and contact each creditor to inform them about how much you are experiencing financial hardships, and how much you can pay off. Offering a lump-sum settlement is generally the best option, as most creditors or collectors will happily agree with it if you can afford it. After considering your financial situation and offer, the creditor might provide you with another settlement offer. If you consider it ok, then proceed, or give them a counteroffer. Once both parties agree at this point, initiate the settlement process. If you reach an agreement with the collector, get a written confirmation.

Choosing a debt settlement company for bill settlement may include the first step only, here you should list your outstanding bills and contact the company. The rest of the work will be done by the debt settlement company.

b) Medical bill settlement

The process is similar to other debt settlement steps. Check all bills and make sure you receive all services listed on the medical bill. Don’t be afraid to ask for clarification if you have doubts about any item. Then you need to check if your debt is still within the statute of limitations.

You may be able to negotiate directly with your healthcare provider for a medical bill settlement. Explain your financial issues and see if they can provide a medical bill settlement offer. Then you can either give a counteroffer or start paying medical bills after settlement.

As long as you pay as agreed, everything will be fine. If you face financial issues within a month and can’t afford a monthly payment for it, call your creditor/collection agency and try to renegotiate again to modify hospital bill settlement payments. This might only work once, the creditor or collection agency won’t entertain your request every month.

c) Credit card bill settlement

The credit card bill settlement process is similar to the conventional debt settlement option. However, you may settle your credit card bills using three possible payment methods:

  • Workout agreement – Through a workout agreement, your credit card issuer may lower your interest rate or temporarily waive off interest. They may also reduce the minimum payment for the cards and waive off any past late fees due to yours. Your credit card provider may close your credit card account as per the agreement. Your credit utilization will increase, for this reason, so your credit score may get a hit.
  • Lump-sum settlement – You may opt for a credit card bill settlement option by offering a lump-sum settlement offer to your creditors and saving you a good amount of money. But if you can’t afford to make large payments upfront, it won’t be a wise option.
  • Hardship agreement – If you face a sudden financial crunch like unemployment or an unexpected health hazard, you may contact your credit card company to get a hardship program. With a hardship bill settlement plan, your creditor may agree to lower your interest rates, waive off late fees, and reduce your minimum payments for the time being.

d) Retail store card bill settlement

Retail card bills can be some of the most difficult debts to handle as a consumer. But yes…you have the option to settle retail card bills on your own. It is suggested that you proceed through a popular debt settlement attorney.

Debt attorneys will understand all the legal aspects of your debts, especially if there’s a chance of facing any legal action. A debt settlement attorney can help you settle your retail card bills and help you become debt-free.

If you’re struggling with retail card debt and want professional help, you may always contact a debt settlement company to sign up for a bill settlement program.

If you think that a debt settlement is a best or perfect choice for you, this is how to choose a debt settlement company:

  • Check with the Better Business Bureau to verify the history of complaints from that company.
  • Check whether or not the company is seeking money in advance or guarantees that the bills will be settled within a fixed date.
  • Check out the fee structure and make sure the company charges fees on the percentage of debt settled, not on the total outstanding balance.

If you don’t want to opt for a debt settlement program, you may consult a lawyer or do it yourself.

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By Valentina Wilson on March 3, 2021

Valentina Wilson is a writer and blogger who specializes in personal finance and positive change and associated with BestDebtConsolidation. She has a master’s degree in financial journalism and seven years of experience in personal banking and believes that small behavioral changes are the key to achieving financial freedom.

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