Private Education Loan Consolidation

By: EconomyWatch Content   Date: 27 November 2009

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With the changes in the student loan rates in the US and the new legislation about loan discharges coming into effect, private student loans have been hit hard. Also, a tighter credit environment has resulted in more stringent credit scoring standards. All of these changes have raised several queries regarding student loan and private education loan consolidation.

Consider the following points before opting for private education loan consolidation:

  • You cannot consolidate these loans until you start repaying them back.

  • It is not possible to consolidate private education loans with federal loans.

  • After consolidating, you will be exposed to a variable rate loan.

How Do I Know if Private Education Loan Consolidation Makes Sense For Me?

Private education loan consolidation may not be the best answer for many of the loan problems.

Consider the following points before opting for this process:

Benefits provided by your current lender: There are very few companies that provide consolidation services for private loans. The requirement of providing private education loan consolidation differs from one lender to another. In fact, several financial institutions or companies will agree to consolidate or refinance your private education loans if one of the loans has been taken from them. Others may consider you eligible only if all your loans are with them.

Availability of Good Consolidators: There are a few companies that do not provide you to comply with a list of stipulations for using their consolidation program. Conduct a through research of the market for a good consolidator. You can start by researching your current lenders.

Check your credit rating: Check whether your credit rating has improved from the time you had taken the loans. Since rates applicable on private education loans are dependent on credit, you might undoubtedly be paying a high interest rate if you had poor credit with no co-signer at the time of the issuance of the loan.

If your credit has improved since then, you would be the best candidate for consolidation. Your rate with good credit should be close to the prime rate but could be 8% or more if your credit rating is poor.


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