What does it mean to consolidate your student loans?
Student loan consolidation is when you gather up all your student loans and hand them over to one company that charges you one monthly rate. One benefit of this is that, often, you can get a lower monthly rate.
Getting a lower interest rate is only one of the benefits of consolidating. The following are some additional benefits:
-Only one payment a month: Forget writing three or four different checks to your various lenders! Consolidation makes it possible for you to write just 1 check.
-Pay less: Generally, when you consolidate, you end up with a lower monthly payment.
-Build your credit: As soon as you consolidate, your lender pays off your old loans and merge them to create 1 new one. Because your old debts got paid off, your credit history looks better.
-Lock in low rate: If you had federal loans the interest rate fluctuated every year on July 1st. By consolidating you’ll lock in one low rate.
Student consolidation loans are wonderful because obtaining them is so easy. Employment isn’t required and you don’t even have to have collateral or a cosigner. Furthermore, good credit is not needed!
Disadvantages of Consolidating:
Don’t scuttle away to consolidate your loans before you read the following: Each choice you make will have some sort of downside. Prior to consolidating your loans, make sure you investigate the positive and negative aspects of consolidation. Here are a couple disadvantages you may want to consider:
-Interest rates fall every now and then. You’ll be stuck with the higher rate if you have consolidated.
-After you consolidate you can’t unconsolidate.
-New terms and conditions will apply to your new loan. These may be terms that you are unfamiliar with. Make sure you read the contract thoroughly before signing it.
-If you choose to extend the life of the loan you will wind up spending more (in interest) than you would have.
Now that you know the benefits and disadvantages of consolidating your student loans, you ought to find out whether or not you are eligible for one of these loans. To be eligible for federal student loan consolidation, you must meet a couple requirements. You must owe more than $10,000 in outstanding federal student loans. You also must be finished with school or taking less than 6 credit hours and attending classes. Finally, you can’t consolidate any defaulted federal loan if it hasn’t been repaired.