Thinking About Consolidation Loans Can Be A Good Way To Reduce Your Debt

Are you near to finish your education or have already finished it and thinking about student loans repayment is driving you crazy

? If you had to borrow different loans to afford your education expenses, after you have finished college, you will have to start paying back the money that was lent to you. In this case, a consolidation loan may be a good option to reduce your debt.

What Are Consolidation Student Loans And How They Work?

Consolidation student loans are designed for both, parents and students who have taken a loan to afford education expenses. The way consolidation student loans work is by building only one big loan based on all your previous loans either Federals or privates.

In Which Ways Can I Consolidate My Loans?

You can consolidate all your student loans in one loan in case you have more than one; in example, if you received a Stafford loan and also had taken a private student loan to complete the amount you needed, you can consolidate both loans in one.

Your parents can also consolidate their loans if they have taken any to help you with your academic expenses. You have to remember that you cannot combine your loans with your parents' loans.

Any Federal loan can be consolidated as well as almost any private loan. There are anyway some restrictions that have to be consulted with your lenders before doing the Consolidation.

Some Advantages Of Consolidating Student Loans

The best point to mention is that you can save a lot of money with the interests rates' reduction generated by consolidating your loans. As you will borrow the money to cancel your previous loans, the interest rate is calculated based in the amount of money you owe and the interest rates of your existent loans. Interest's reduction can be up to 1% monthly depending on the lender you choose.

You can combine all your monthly payments in one single payment, this will save you a lot of time and, depending on the repayment plan you select of course, the amount of money you will pay month by month will not be as high as if you had to pay different bills each one with its fixed amount plus a interests.

You can decide to extend the repayment period over the standard 10 year repayment plan. This will reduce your monthly payments, but you should be careful with this option, since it will increase the interest rate. Anyway, most of lenders aloud you to switch your repayment plan once a year. You can start paying the standard 10 years plan and then, if you find difficult to pay the fixed amount of money, you can switch to another repayment plan, lets say, for example a 15 years plan instead of the 10 years plan.

You can consolidate your loans with any lender. This is a great possibility for you to search for different lenders and compare what they offer to you. Interest rates will be similar for all lenders, but they may have differences in repayment plans or future rate discounts or any other benefits for early payments. Make sure to find yourself the best deal before choosing your lender.

When Can I Consolidate My Loans?

Students must have finished school before applying for a consolidation student loan. You cannot ask for these kinds of loan if you are still in school. However, parents can consolidate their PLUS loans whenever they want to.

Student loans should be within their grace period or have already enter the repayment. Some lenders, may also require a minimum balance in order to consolidate your loans.

by: Devora Witts

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