What is Bill Consolidation?

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  • Written By: Garry Crystal
  • Edited By: Niki Foster
  • Last Modified Date: 12 November 2019
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Bill consolidation is the process of transferring all your outstanding debts and loans into one loan. In theory, this loan should help convert all the interest from your other debts into one easy to manage payment per month. These types of loans should lower interest rates and help you pay off your debt faster.

There are bill consolidation companies that can advise you on the best type of consolidation for your situation. They should be able to handle payments for your account and lower your rates. Before signing with a consolidation company, you should compare their rates and terms of agreement with those of other companies.

Bill consolidation companies are also known as debt management companies. The aim of these companies is to eliminate your short-term debt within a five-year period. They have the professional skills to negotiate with your creditors and reduce your interest rates. In some cases, your creditors may agree to waive any late repayment fees and other charges if you are working with a bill consolidation company.

With bill consolidation, you must pay the company one monthly payment that includes their fees. They then pay the accounts that you have agreed to consolidate. There are some interest rates that cannot be consolidated. These can include student loans and mortgage payments.


Monthly fees to the consolidation company are the most common practice, although some companies charge large “upfront” fees instead. Many clients drop out of the consolidation contract before the term ends, so monthly fees are a better option. Some creditors may report your use of a bill consolidation company to the main credit reporting agencies. This can temporarily prevent you from opening any new accounts. After a few months of maintaining regular payments, you may be able to qualify for new accounts and credit cards.

When searching for bill consolidation companies, try to look for one that deals solely with debt management. Companies that deal with a variety of services, such as bankruptcy or debt negotiation, do not always have the best track record. Remember to ask when your accounts will be paid off in full. Consolidation companies who know their business will be able to give you a date when each of your accounts will be paid in full.

Also compare fees from one consolidation company to another. Request service quotes from a few different companies; you may find the differences to be quite large. Once you have chosen a company, always remember to check your statements. Mix-ups in paperwork or poor service can result in late payments on your credit history and lead to your credit score being lowered. At the first sign of any problem, contact your consolidation company, explain fully what has happened and find out how they are going to resolve the issue.


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If you consolidate, does this give you a bad credit rating?

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