student loan consolidation
Student Loan Consolidation Pros and Cons

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Overview of Student Loan Consolidation

Student loan consolidation is a student loan repayment option that involves combining several or all student loans into one. Many times multiple loans such as federal or private student loans are needed to finance an education. Depending on the types of loans granted and the various lenders involved, a borrower may be eligible to consolidate student loans into one monthly payment. Student loan consolidation may not be right for everyone, but it can offer great benefits for qualified borrowers.

Benefits of student loan consolidation

There are several benefits student loan consolidation may provide. When beginning the repayment process, a person will probably have to pay different rates of interest for different loans. Often, consolidation allows for one, lower, fixed interest rate. The interest rate on the consolidated loan is dependent on the present rates of the existing loans and the repayment plan that is chosen by the borrower. Most of the time, the interest rate is determined by the weighted average of the interest on the existing loans. There are on-line tools, such as a student loan consolidation calculator that will estimate what the final interest rate will be. This interest rate will remain fixed for the entire life of the loan. Student loan consolidation also allows borrowers to make payments to one single lender instead of several different lenders. This makes repayment more convenient, manageable, and organized. In many situations, loan consolidation allows for a lower monthly payment. This will simplify the payment and make the financial jordan 8 playoffs jordan 8 playoffs playoff 8s cheap playoff 8s jordan playoffs jordan 8 playoffs playoff 8s playoff 8s 2013 burden much easier to understand and manage and therefore will probably avoid unnecessary accumulation of interest. Although student loan consolidation may offer various benefits, research should be done due to so many unique individual financial situations.

The downside of student loan consolidation

There are many important factors to consider when deciding whether or not to consolidate student loans. Lending institutions may claim that consolidation will save you money, but most likely you will be paying a larger sum of money over a longer period of time, even though the monthly payments may be smaller. Although this may be ideal for some borrowers, this isn't the perfect plan for everyone. Also, the interest rates of your existing loans may be smaller than the consolidated rate and depending of the financial institution, there may be specific or hard to meet criteria that are required to be eligible for student loan consolidation. It is necessary to investigate all the details before a decision is made.

When to consider student loan consolidation

It is best to consider student loan consolidation at the start of the repayment process. If you consolidate at the beginning you avoid accumulating interest and more of your payments will be applied to the principal. If possible, make extra payments. The longer the repayment period takes, the more you will pay in interest.

Student loan consolidation repayment plans

There are four common types of repayment plans that students and parents can choose from. They are as follows:

1) Standard Repayment Plan: This plan includes a fixed monthly payment for up to, but no longer than 10 years.

2) Graduated Repayment Plan: This plan allows for lower monthly payments at the beginning of the repayment process and then after, usually 2-5 years, the payments will increase due to the likelihood that salary will also increase. This plan requires that the loan be paid over ten years.

3) Extended Repayment Plan: This plan includes a fixed monthly payment that can be paid over 12 to 30 years. The length of this repayment process depends on the amount of money borrowed.

4) Income Contingent Repayment Plan: This plan includes monthly payments that are determined by the borrower's income, family size, and the amount needed to be repaid. This plan can paid over for up to 25 years.

We hope the above information helps you understand how Student loan consolidation works.

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