Things to Know Before you Consolidate Your Student Loan Student loan consolidation has great benefits, but often looks like a complicated process and scares people. There is nothing to be afraid of, it's actually much simpler, as you think, but to get the most out of your consolidation loan, you need to know several important things.
How to find the best student loan consolidation rate?
Under FFELP (Federal Family Education Loan Program) guideline lenders calculate your rate as an average of your existing loans' rates. They are not allowed to offer you a lower rate and compete for it. So there's really no point to look for a lender with the lowest rate.
But many lenders offering big discounts lowering. Typically, you get a discount after several payments on time or if you set an automatic payment from your bank account. When using the online calculator, most lenders give you your rate for discounts. So you'll have to be careful and all conditions of your new loan to read to ensure that you are eligible for benefits.
How many times can I consolidate?
Typically, you can only consolidate your loans once. That is why it is important to do your homework and select the right lender the first time. There are two circumstances when you can recon solos date your loan. First, if you decide to study more and take more loans. Second, if the consolidation for the first time not all your previous loans are recorded. This is theoretically possible, but in practice it happens very rarely. Debt consolidation companies are usually pretty good about including all outstanding loans into a new loan.
What repayment plan to choose?
Most companies offer at least two payment plans - standard and graduate. They may be called differently by different lenders, but the general idea is the same. Standard plan is the most simple - your monthly payments are the same for the life of your loan. With this plan, you usually pay the least amount of interest.
Graduate plan assumes that the first monthly payment is lower, it may be low for 12 or 24 months. But your subsequent payments are higher. This plan is perfect for candidates who are not sure to find well paid work right after graduation, or if you expect other major expenses, like having a baby. By choosing a graduate plan, you will be more interest on standard repayment plan, but the difference is usually not that much to pay.
There are other plans that allow you to make lower monthly payments, but you will have to pay off your loan anymore. These plans are usually the most expensive because you are paying a lot more interest.
Does bad credit consolidation student debt?
If you have federal student loans and go for a federal loan consolidation program, your credit history does not matter. With private lenders would be more difficult to get approved if you have bad credit. So if your federal and private loans, consolidate federal loans first, this will improve your credit score. If you do not have any federal loans, take steps to improve your credit. The easies way is to get a credit card and pay it on time fore several months.
How to chose the best loan consolidation company?
As you already know, the lenders do not really offer your lower growth rates than others. So it makes sense to look for a lender who offers the most advantages in rate reduction. Other points to consider are: Whether there are any additional charges for consolidation and deferment option is available. When you go for a federal loan consolidation, there are several circumstances when payments can be deferred, such as financial problems, illness or unemployment. If you are going for a privet lender for your student loan consolidation, it is important that the lender delay option also.
Things to Know Before you Consolidate Your Student Loan
