If you are making more than one monthly repayment to your student loans, you will find student loan consolidation working as a stress buster. A Student Consolidation Loan brings all of your current federal student loans together with a fixed rate of interest. The rate is established by calculating the average of interest rates of all the loans to be consolidated.
Student Loan Consolidation Services allows up to 30 years of rebate to repay the loan, depending upon the loan balance. Though increasing the repayment period, increases the total interest to be paid over time, you are entitled to overpay than the minimum amount due at any point of time with no penalty.
Almost all federal student loans, including all subsidized and unsubsidized loans are capable of consolidation; however, private education loans are not privileged for getting consolidated.
Many people consider joining together their loans in an effort to lower their monthly payments and streamline their finances. The idea behind this is that, by stretching the repayment process or refinancing the loans at lower rates of interest, borrower, reduces the monthly payments to be made and it also allow borrowers to buy out time for the repayment process. Unfortunately, this approach doesn’t work for many.
One problem with federal loans is that, they cannot be consolidated with private loans. Another is that starting from July 2006; all federal student education loans started carrying fixed interest levels. Before then, these federal loans were consolidated with variable costs and by consolidating them, borrowers had the power to lock the interest rate at a lower percentage than what they were paying on each loan separately.
There is actually, no financial benefit to consolidating federal loans, than developing a single monthly payment and access to different repayment plans.
If one can afford to pay the loans, it is not advisable to go for consolidation of loan as it will only increase the amount to be paid as interest. It, on the other hand, doesn’t have sufficient funds to repay the loans or one is having trouble in making multiple monthly payments, consolidation can be an alternative. One must always remember, that even though, these repayment plans lower the monthly payments, they add on several thousand dollars as interest cost by stretching the life of the loan over years.
Students who have previously started repaying loans can select the income-based repayment plan, but doing so will restart the time and provide the loan a new term of 25 additional years or so.
Another potential prospect of consolidating your private loan is the removal of a co-signer, which removes the potential liability of the loan from parents and relatives; however, this is only possible after 24 to 48 months of making regular payments.
Crucial questions to request a consolidator are generally whether it charges origination fees, if they incur any prepayment penalties, what the maximum interest rate is actually and what will be the life of the loan.You must read the terminology carefully along with a friend or relative so as to leave no point unnoticed. If you don’t comprehend something, question the lender about the same, until you are satisfied with the reply. Of course, you’re entering in a contract that can last as long as 30 years. And most important is to stay away from any lender which charges a prepayment fee. You’ll want the option to settle the loan early without having to be penalized for it.