What is Student Loan Consolidation
What is student loan consolidation?
To consolidate your student loans means to take all of your various loans and give them to one company. One of the many benefits of this is obtaining a smaller monthly fee.
Additional Benefits:
Getting a lower interest rate is only one of the benefits of consolidating. Here are a few more benefits:
-Only one payment: Instead of writing multiple checks to all your lenders, consolidation makes it possible for you to write only one check.
-Smaller fee: Generally, when you consolidate, you end up with a lower monthly payment.
-Raise your credit score: Once you consolidate, your lender pays off all your old debts and merge them to generate 1 new one. Because your previous loans were fully repaid, 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.
Consolidation loans are wonderful because they are easy to get. You don't need to be employed or have collateral or a cosigner. You don't even need good credit!
Disadvantages of Consolidating:
Before you run off and consolidate your loans, consider the following. Every choice generally has a downside. Prior to consolidating your loans, make sure you investigate the positive and negative aspects of consolidation. The following is a list of some disadvantages:
-Sometimes interest rates fall. You'll be stuck with the higher rate if you have consolidated.
-Once consolidation "unconsolidating" is out of the question.
-New terms: Your new consolidation loan will have different terms than your old loans did.
-If you extend the repayment period of the loan you may end up paying more interest.
You know the positive and negative aspects of consolidating your student loans, you will want to know if you can get one. To qualify for federal student loan consolidation, there are a few requirements. You must have more than $10,000 in outstanding federal student loans. You have to be done with college or enrolled in under six credit hours of classes. Last but not least, you can't consolidate any defaulted federal loan if it hasn't been repaired.
Elise Fisher loves writing articles for her website About Student Loans. Be sure to check out the Student Loan Consolidation page.
