Save Money With Student Debt Loan Consolidation
Student loan can be a burden on recently graduated students as the income is low
. What adds to the burden is when there are multiple loans from different sources. Hence juggling payments to these accounts become quite challenging. Moreover; the interest on these loans is high when paid separately. With
debt loan consolidation, you can save money and also manage it well. It basically combines all loans of an individual and makes it as one single loan. Such
debt loan consolidation could be done either by private lenders or through a federal student loan.
Many lenders that offer student loans, offer consolidation loans wherein they will combine different loans into one loan. This means they take out a new loan such as a second mortgage and pay off the student loan with this new loan. Consolidation works at its best when an individual has different type of loans. Student loan consolidation can be done for both private and federal loans. Such consolidation is a great way to simplify your monthly payments, but you cant mix federal loans with private loans. The federal loans must be consolidated in a separate group and private debts in another group.
Students are able to consolidate their federal student loans, including Direct, Stafford, and Perkins loans, into a Direct Consolidation Loan. The consolidation is processed by the Federal Direct Loan Program which is the servicing agency for Federal Direct student loans. The interest rate for your Direct Consolidation loan will be a fixed rate and the rate is determined by the weighted average of the interest rates on the loans being consolidated, rounded to the nearest higher one-eighth of one percent. An important fact to note is that federal
debt consolidation loan is available only once during the life of the loan.
Similarly, private student loans can be combined and refinanced to reduce the stress of multiple payments and lowering your interest rate. But as its easy to consolidate your federal direct loans, there are a few more parameters to see if you can really benefit by consolidation of private student loans.
When you apply to consolidate your student loans, the interest rate will be based on your credit score. It is essential that you review your credit report and make sure there are no errors, which are common on most credit reports. If you have paid off a loan or closed a credit card and it is still listed on your credit report, it can significantly affect your credit score. It may be advisable to make sure that any errors are corrected.Before you opt for student loan
debt consolidation, it is advisable to weigh in the benefits and how much leverage it will give you in your financial situation. Other than the common benefit of lowered interest rate and single payment, if you have one or more private student loans that have a variable interest rate, consolidating into a home equity loan will lock in your interest rate at a lower percentage. But the hind side to it is that it comes at a cost of an extended term.
So you may want to research the different terms and conditions offered by educational lenders and contrast them with non-educational lenders to weigh in the pros and cons. As different student loans typically do not compete on interest rates, they are pretty similar from one education lender to the other. Evaluating your options with the right people will help to save more and understand better.
by: Ask Bill
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