Finding the best Student Loan Consolidation can help you become one less person burdened by post-secondary debts. It could also knock your interest rate down significantly, meaning that you pay less in the long-run for your education. Did you know that one in eight Americans is currently carrying student loan debt? With many different companies focusing on this industry, it can be difficult to figure out which lender is going to work best for your needs and budget. That’s where we come in!
Defining Consolidation Loans
Consolidation loans allow borrowers to combine various federal student loans into a single loan. This allows for more favorable rates and repayment plans that are easier for the borrower to manage. Consolidating your loans does not reduce the amount you owe, but it can help you pay off your debt faster by providing a fixed monthly payment amount.
What is the Cost of Consolidation Loans?
The cost of a consolidation loan varies based on the interest rate of the new loan. There’s an additional fee that’s typically paid upfront and every month. It can also vary due to other factors such as institution, amount owed, and duration of repayment.
How to Qualify for Consolidation Loans
A consolidation loan is a type of federal student loan that you can use to consolidate your other federal education loans. This typically means combining all your loans into one new loan with a new, lower interest rate and extended repayment terms. You typically need an “eligible” or “consolidation” income-driven repayment plan to qualify for a consolidation loan.
Pros of Consolidating your Student Loans
Consolidating your student loans can be a great way to simplify your finances, but it may not always be the best choice. Consolidating multiple loans will likely result in a longer repayment period and higher monthly payments. If you are on a fixed income or have a low debt-to-income ratio, consolidating may not necessarily improve your financial situation.
Cons of Consolidating your Student Loans
The main disadvantage of consolidating your student loans is that you will now have a single monthly payment. This makes it harder to budget. You also may lose some of the benefits, such as interest rates and deferment options, by combining all of your loans together.
How to Save Money with a Consolidation Loan?
Some of the channels through which you can save money with a business debt consolidation loan include: Reducing interest costs on the debt you consolidate. It is always advisable to use a debt consolidation loan to pay off your debts at the highest interest rates. It brings the biggest savings, the “biggest bang for your buck” so to speak.