Student Loan Consolidation

By: EconomyWatch Content   Date: 4 December 2009

About The Author

EconomyWatch Content

Follow The Money

EconomyWatch, Content Team

 

  • Dot Div
  •      

Student loan consolidation is a vital tool for reducing one’s monthly payments and the interest on the total due amount. Besides extending the repayment period, consolidation of student loans makes debt management easier. All types of student loans, whether federal or private, can be consolidated into one. The consolidation of federal loans is backed by the federal government but offered by private lenders. 

Student Loan Consolidation: Advantages

Although convenience and cost savings are the two major benefits of student loan consolidation, there are several other advantages:

  • It can lead to an up to 60% reduction in one’s monthly payments

  • Reduces (in most cases) the interest rate on the loans

  • Consolidation options are available online as well

  • No credit check is required for federal student loan consolidation

  • A lowering of the debt to income ratio leads to a better credit score

  • No co-signor is required for federal loan consolidation 

Student Loan Consolidation: When Should You Opt For It 

Student loan consolidation should be resorted to only if necessary. The best time to consolidate one’s multiple loans into one is when:

  • One is finding it difficult to make the various monthly payments

  • If the interest rate on one’s loans is higher than the current market rate

  • One wishes to extend the repayment time

  • One wishes to improve his credit score and seek any other loans

  • One is in the grace or the repayment period of some of the loans

Consolidation may not be the right option for some student loan holders. If a student has a substantial amount of loans at a relatively low interest and a small amount of debt at higher interest, consolidation does not make sense. In such a case, extended repayment can be considered.

Since federal student loans can be consolidated at a much lower rate of interest than private student loans, they should not be consolidated together. If one chooses to do so, all the benefits associated with the federal student loans are lost. Private consolidation loans are available after a credit check has been done. These loans are subject to the receipt of a promissory note and the verification of information provided by applicants.


  • Dot Div
  •      

Most Popular in Student Loans

Related Links
blog comments powered by Disqus