Student Loan Consolidation – 5 Great Tips
Consolidation Loan allows students to consolidate (combine) multiple federal education loans into one loan. The result is a single monthly payment instead of multiple payments. There are two types of student loan consolidation:
- Federal student loan consolidation; which is a logistical move one do through the department of education. Therefore, you may need to consolidate to be eligible for some federal loan repayment programs, but federal consolidation will not lower your interest rate or save you money.
- Private student loan consolidation; which is also called student loan refinancing, is a financial move one do through a private lender. However, if you qualify based on factors including your credit score, you can save money by getting a lower interest rate.
When you consolidate federal loans, the government pays them off and replaces them with a direct consolidation loan. One is eligible once he/she graduates, leave school or drop below half-time enrollment. Consolidating federal loans through the department of education is free; steer clear of companies that charge fees to consolidate them for you.
Additionally, you will get a new loan term ranging from 10 to 30 years. Your repayment per term will generally start within 60 days of when your consolidation loan is first disbursed and will be based on your total federal student loan balance. Applying for consolidation takes most borrowers less than 30 minutes, according to the Federal Student Aid website. As part of the process, one will need to provide details about their existing federal student loans, and choose a federal loan servicer and repayment plan for their new consolidation loan.
Therefore, with most student loan consolidation it is always best one to have a clear understanding of the exact details of the loan conditions and their possible implications. The following are five tips one need to consider before going ahead with the consolidation plans;
The interest rates for everyone will be the same rate
This is where all federal student loan consolidation rates have to start with the rates as suggested by the congress each year. Loan institutions are required to give every person the same suggested rates.
There are considerable benefits and other discounts when one is consolidating the loan, particularly if it is their first time. One may receive additional savings off his/her new rate for using automatic payment facilities.
Read the small print before signing
There are some companies that will offer what seem to be very attractive rates at first glance. Some other loan institutions may offer additional non-payment grace periods of a few days. One should make sure he/she has read the small print.
Research the company’s customer service policies
One should consider when to contact the finance company, observe what their front-line customer approach feels like. Also are they knowledgeable on all facets of student loan consolidation, and how their speed of service and helping with the information one need is.
Other financial options
It may also be beneficial to look at some other options as well. Once one have sorted loans out, it is important to pay them on time.