Student loan consolidation tips

Student loan consolidation
Graduating a college is a dream come true, but those who have been there know it’s just the end of a road and the beginning of another. On average, college graduates start their new “life” with a $20k debt. If this debt is spread between multiple lenders, consolidating student loans can be very helpful. If you are not sure if this is the right thing for you, keep reading to understand the advantages and the side effects of student loan consolidation.

A student loan consolidation works by bringing all your loan into just one, with a fixed rate and an extended period of refund. Easy debt management is an obvious advantage. Since all your repayments are gathered into one, it much easier to keep track when and how much you have to pay every month

An important aspect of consolidation is fixing a low interest rate. This is calculated as an average to your current loans and remains fixed for the rest of the repayment period. This way you avoid possible rate increases in the future.

Another benefit of student loan consolidation is a possible increase of your credit score by reducing the number of opened accounts on your credit report. For people who meet certain special requirements, like paying your loan on time consistently.

On the other side, there are several negative effects to take into consideration. Such as:
Consolidation increases the total cost of your loans. All your loans are brought together in one place and combined into a new one with a longer repayment period, on average 10 to 30 years. This new term helps you by lowering your monthly payments but adds more payments to your overall cost. For those who can afford a quick pay-off, consolidation is a more expensive solution.

Applying for a consolidation loan can be tough sometimes. Lenders have a set of strict rules for those looking to borrow: you need to have more than $ 10k debt in loans, you must have already graduated or left school, and most of all, you must not be currently in default of your loans.

Student loan consolidation is not necessarily your best or only option. Other programs looking to help exist and they must be searched. For example, there are government programs who help repay the loans by doing community service.

Be careful when consolidating federal loans into a private loan — you lose all kinds of federal rights like the options of forbearance, cancellation, deferment, and affordable repayment plans. Also, federal loan consolidation programs generally have lower interest rates than private programs..

You can only consolidate once. With a few exceptions, once you get a consolidation loan, you can’t consolidate again. So be careful and make sure you get the best deal possible.


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