What is a student loan consolidation?
Over the course of your studies, it is likely you are going to take up a number of student loans if you depend on them to finance your college education. Things can get a bit hectic when you are required to make the multiple repayments. In case you have more than five loans with each of them coming with its own statement, you need to find a better way of managing the process.
Consolidating your student loans is a great option that comes with many benefits. If the thought has not crossed your mind, and you are wondering why consolidate student loans, then you need to read on to find out why it is in your best interests to do so. When you opt to consolidate, you end up making one loan repayment as opposed to many separate payments.
The consolidation process involves identifying a suitable lender to combine and take up your old loans and subsequently clear all of them. You are thus left with one new loan from the lender to repay. To qualify for the arrangement, you must have completed your studies. In addition, you must have a good repayment record in repaying your current loans. If you have had any case of default, you may find it difficult to find a lender.
Benefits of student loan consolidation
The most notable benefit of consolidation is the fact that you now have to pay one check as opposed to making many different payments. The process gives you peace of mind because you do not have to worry about missing some payments. Should you choose the consolidation path, you get a fixed interest rate that can save you a lot of money especially if you take the loan at a period when interest rates are low. When you have to pay many loans with a variable interest rate, you may end up paying a lot of money in interest.
A huge benefit of combining your existing student loans to one consolidated loan is that you can now negotiate for a longer repayment period. It is possible to stretch your new loan for up to 30 years meaning that you can end up paying a low monthly amount. If you go about the process right, you have a chance to lower your loan repayments by up to 40%.
Having graduated and with the ability to repay your loan, you do not need to have a co-signer on your loans. Should you opt to go the consolidation way, it means that you will eliminate the co-signer from the process. Removing a parent from the position of liability is the least you can do after the sacrifices they have made for you.
Student loan consolidation concerns
As you go about the consolidation process, you need to keep in mind that although you will now be making lower repayments, you will pay more money in interests as a result of the extended repayment period. When you consolidate, you give up on favorable terms that come with student loans that include a grace period or an income based repayment plan.
In case you were wondering why consolidate student loans, you need to look at the pros and cons detailed above before making a final decision.