Sometimes people think that loan consolidation is too much of a hard work, so they leave all their loans as is and try to cope with all payments. In reality, consolidating your outstanding student loans is not at all hard.
All it takes is a bit of careful research, to find the lender that will help you save the most. And the benefits of consolidating your college debt are significant. Consolidating can save you several hundred dollars. Find out how to get the most benefits of student loan consolidation.
Benefit 1: Less hassle
How many bills do you have to pay every month? How many of them are from different lenders for your student loans? If you are like most people you probably hate keeping track of all bills and payments that tend to arrive at a different time during the month. Consolidation will solve this problem – you will have to make one payment every month, that’s it. No more forgotten student loan bills and trying to remember what you paid or haven’t paid yet.
Benefit 2: Your will pay less
Even though your consolidated rate is calculated as an average of your existing loan rates, the resulting rate is usually slightly less. So your monthly payment will be lower.
Often students and young graduates try to compare several lenders in hope of finding the lowest consolidation rate. There is no reason to do so. According to the law all lenders have to offer you the same interest rate as Federal Family Education Loan Program. However, most lenders offer additional benefits and that’s where you savings will really come from.
Majority of lenders reward you with reduction of interest for setting a direct bank withdrawal. Paying on time is also very important – usually you can get a reduction up to 1 percent on your interest rate for paying before the due date for 24 or 36 month. So, for example, if your current average interest is 7.5 percent, after all discounts it will be 6.25 percent. Considering that you will repay your loan for several years this will account to a substantial savings.
Benefit 3: Better credit history
When you pay several loans it is inevitable that from time to time you miss some of the payments. This can lead to damaging your credit history. And as you know, if you have bad credit, it will be difficult to get new credit cards and a mortgage when you decide to get your own home. On the other hand, consolidating all your loans and paying one bill on time every month will help you built a strong credit history.
So, there is really no reason not to consolidate. The only thing you will have to keep in mind is that you will have to choose the lender for your consolidated loan very carefully. As a general rule consolidating college loans is only allowed once. There are only two exceptions – if you decide to continue your study and take another loan and if not all your student debt was included in the first consolidation.
So usually you can’t “re-consolidate” if you see a better offer later. For this reason you will have to look at the fine print so there are no surprises later. For example some lenders offer attractive benefits, but they have additional fees or their fees for late payment are enormous. You will have to find all this out before you commit to a particular lender.