Student Loan Consolidation Guide

What is a Student Loan Debt Consolidation?

Having availed a number of student loans to fund our education, at a certain point of time our loans become seriously unmanageable and not practical. The concept of Loan Consolidation comes up as a solution to this problem. Loans incurred till date are consolidated into a single liability. The repayment liability is restricted to the newly created liability which is simplified as requested by the borrower.

Federal and private loan consolidations are possible. Private loans have a fixed interest rate, while federal loans rates keep varying.

Student Loan Consolidation Interest Rates

A bad credit score generally reduces your chances of getting an optimal consolidation. A positive credit score improves your possibility of obtaining a loan with a low rate of interest.

The lenders in general reduce interest rates based a good credit history, as you are not seen as a risk factor. Set your credit records and be prepared to apply for consolidation when the rates are optimal.

The interest rates on consolidation loans differ from lender to lender. Shop around for an optimal consolidation plan. Please be careful while calculating the cost of a consolidation plan.

Tools such as student loan consolidation calculators help in deriving at the exact cost of borrowing. Calculators are also tailor made by the lending institution to suit their package.

Student Loan Consolidation Application

Consolidation of student loan application can be submitted during any time before you complete the course or during grace period for repayment. Be sure you have not defaulted on any of the loans to be consolidated. Federal and private loans can never be consolidated together as they have varying terms of loan. Student loan consolidators help provide details about the best suitable program for the students considering their financial status and further study plans.

• Understand that choosing a legitimate lender is of paramount importance while applying for consolidation, not only rates and repayment cycle but also in terms of legality of the process.
• Learning about various student loan consolidation lenders and their terms of loan consolidation is necessary to decide on the choice of loan scheme.
• Online loan application facilities are also available helping students process their consolidation request from their homes with a minimum process time and no credit check.
• They charge no hefty fees.
• Know their conditions well to avoid mistakes while filling up the form.
• Providing correct and accurate details creates a positive impression to the lender.

Different types of Consolidation Programs

Student loan debt consolidations are of two types name Federal and Private Loan Consolidations. These loans are not allowed to be consolidated together. The primary difference between these consolidations is that Federal Consolidation offers fixed interest rate while the private consolidation may or may not offer a fixed interest rate. Federal Loan Consolidations being government loans have many added advantages compared to Private Loan such as deferment, forbearance and forgiveness. Numbers of lenders specialize in Federal and Private Consolidations.

Benefits of Student Loan Consolidation

• Number of Loan Liabilities reduced to one.
• Accountability and answerability to a single lender.
• One liability and one repayment every month.
• Lower Interest rate thereby reduced interest burden.
• The entire liability is now available at the lowest rate available in the market.
• Single repayment which is the lowest and hence affordable.
• Flexibility in repayment time schedule up to 30 years.
• Repayment time period is longer to offer lower payments every month.
• Improves your credit score as there is hardly a chance to default on payment..
• You know commitment and the time frame available repayment.
• Fixed rates offer fixed liability irrespective of market status.

Student Loan Consolidation Scam

There are unscrupulous individuals who are involved in fooling around students exploiting their genuine needs Scams are of two types namely

• Bribery: Most common form of scam is bribing schools and educational institutions recommend a particular consolidation scheme offered by a specific company without offering a choice.
• Fraud committed by Impersonation: It is only during repayment that these frauds come to light. Only when the student gets notice about a loan that he did not apply for, an impersonation fraud comes to light.