Records have shown that there are about 20% of college students who are using student loans to pay for their college education. This means that student loans are a great source of financial aid for students who are in need of financial assistance for their education. Unfortunately, students often leave college with debts that cause them huge burdens. In addition, they often have multiple loans from different lenders, meaning they are writing more than one loan repayment check each month. In order to prevent having multiple check repayment, it is advisable to consider student loan consolidation.
This term may not be familiar to you but to put it simply, it is about combining all your student loans into a single loan with one lender and one repayment plan. In actual fact, loan consolidation is very similar to refinancing a home mortgage. When you consolidate your student loans, the balances of your existing student loans are paid off, with the total balance rolling over into one consolidated loan. In other words, you only need to worry about paying off one single loan instead of multiple loans.
There are many benefits to loan consolidation. One of them is that it helps to integrate all your student loan payments into one monthly bill. Another feature of the plan is that it provides a fixed low interest rate for your loan and this translates into huge savings for you in the long term. In addition, consolidated loans also offer flexible repayment options and no fees, charges, or prepayment penalties. Credit checks and co-signers are not necessary for such loans as well.
To get a student loan consolidation, you can choose to do it through any bank or credit union that participates in the Federal Family Education Loan Program. Regardless of the option that you choose, the loan terms and conditions are generally the same. However, you may wish to perform a check with the lenders that hold your current loans. Having said that, if all your loans are with one lender, you must consolidate with that lender.
Bear in mind that you are only able to perform the consolidation once, unless you wish to take out more loans. Therefore, you will want to make sure you get the best deal the first time. The interest rate will be the same from all lenders, but some lenders may offer future rate discounts for prompt payment and a discount for having monthly payments directly debited from your account. The options are open to you for consolidating your loans any time during your six-month grace period or after you have started repaying your loans. If you opt to do it during your grace period, you may even be able to get a lower interest rate.
There are two main factors that need to be taken into consideration when you are choosing your consolidation plan. They are the interest rate that you are going to pay and your repayment plan. The typical period for to repay student loans is about 10 years, but depending on the amount you’re consolidating, you can extend your repayment plan all the way up to 30 years. However, if you choose to extend your repayment term, it will take longer to pay off your overall debt. This means that you will eventually end up having to pay more in interest, hence you should try to avoid this while selecting the appropriate student loan consolidation plan.