Posts Tagged ‘consolidate student loans’

Information About Student Loan Consolidation

A Definition

Student loan consolidation is typically defined as the process or the act of combining multiple loans into a single loan in order to decrease the monthly payment amount or elevate the repayment period. There are a lot of reasons behind it, and among those is money saving payment incentives, decreased monthly payments, fixed interest rates, and new or renewed deferments.

The Benefits of Student Loan Consolidation

Student loan consolidation has a lot to offer. That is what many experts often say. To find out what consolidation has to offer, let’s read on.

Overall Interest Savings

Over time, the student loans you have borrowed have been assigned with different variable interest rates. Note that the key word here is variable. While the loan you received may have offered, say, 3.5 percent at first, the rate will actually go up as the interest rates go up. So, if you have two or more of these loans, there is a great possibility that you may have owed amounts at different rates, and these rates can rise and fall yearly. Considering that the interest rates have nowhere else to go but up, it is no doubt a safe bet that the debt you have accumulated will mount faster than it would if you consider a student loan consolidation.

By considering student loan consolidation and remaining on your 10 years payment plan, it is possible that you can lock your interest at today’s current loan rates and save some bucks over the long haul. Aside from that, all of those loans that may have come from different lending companies or banks can be a burden to deal with. So, if you consolidate, it means that you only deal with one single company and one payment rather than several. Other than that, you have the great chance to receive added bonuses like payment and interest rate reductions in case you pay your debts on time over a period of months. These benefits are also possible to come if you have automatically withdrawn your monthly payment from a checking or savings account.

Improved Credit Score

By considering a student loan consolidation, borrowers not only save or reduce their long term debt but can also help change their credit score for the better over time. It is worth noting that an improved credit score is a very important factor when a person enters the “real” world and wants a new car, apartment or charge card.

Here are some tips for you that can help you as you enter the job market.

• More Open Accounts, The Lower the Score: Over the student borrower’s life, he or she may have borrowed up to eight separate loans to pay for school. Each of these loans has a different payback amount, payment terms and interest rate. The more accounts the student has opened, the lower the over credit score. Thereby, lowering the amount of open credit lines on a credit report is needed, but this can only be made possible through a student loan consolidation in which the older accounts will be combined into a single account.

• The Lower the Payments, the Higher the Score: When the credit report evaluation comes, it is usual in the process that the amount of the borrower’s monthly minimum payments is taken into account. So, when you hold a number of loans, every payment is considered part of the borrower’s monthly payment obligation. Those who have considered consolidation have only one payment to make, which is typically lower than the minimum amount of the separate, multiple loans.

• The Debt to Credit Ratio Matters: As you may know, the credit bureaus typically find out if you are in debt. They do this by way of evaluating the amount of your available credit you actually use. So, in case you have a total of $10,000 available on three credit lines and you owe $2,000, your score will then be considered higher than especially if you have maxed out your on credit line with a $2,000 limit. It is worthy to note that if a person has several loans with a maximum used, it will reflect negatively on his or her credit score. Given this fact, consolidating the accounts is very important in order to lessen the number of open accounts being used.

Returning to School is a Possibility

Many students and graduates left school for family, career or financial reasons. The odds here are they will want to return to college down the line. However, if they fail to pay on their student loans while they are out of school, there is a great possibility that they can be kept from receiving any financial aid when they return. So, if financial reasons were part of the primary reason they left school, it therefore implies that digging a much deeper hole will only make it harder for them to come back.

By consolidating, the loans will also become easier to manage and pay off. And, once the loans are consolidated, you can retain your right for forbearance as well as for deferment. You can even take advantage of income sensitive and graduate repayment options which you may not have encountered before while you’re on your multiple loans.

Hiding from Loans is Impossible

There is one particular truth when it comes to student loans – you can’t hide from them. It may sound extreme though, but school loans are completely immune to bankruptcy and those students or graduates that failed to pay their bills face stiff punishments. The usual consequences are poor credit ratings, garnishment of wages, and IRS penalties.

Besides, attaining licenses in certain fields is impossible when you failed to pay off your student loan debts. There is even a chance that you may be excluded from some government contracts if you own a small business. With all these consequences, it is then clear that avoiding a student loan is no way to start a life after college. If you do come back and take out more and more student loans, you will be able to consolidate again after graduation.

In the end, about half of the students coming out of college have actually gained their degrees. Of course, it can be tough to remain and stay in school with financial burdens, and it is harder to come back. But, thanks to student loan consolidation that creating one less barrier to coming back to school and keeping your credit rating clean is now possible.

The Right Period to Consolidate

In the government consolidation loan program, it is interesting to know that there are actually no deadlines connected to it. It is supported by the fact that you can apply for the student loan anytime during the grace period or even on the repayment period. But to consolidate student loans, some considerations must be paid attention. To consolidate student loans, you should know that it usually take place during your grace period. At this moment, the lower in-school interest rate will then be applied to estimate the weighted average fixed rate to consolidate student loans. And once the grace period has ended on your government student loans, the higher in-repayment interest rate will be applied to estimate the weighted average fixed rate. Given such process, it is then understandable that your fixed interest rate for government student loan consolidation will be higher if you consolidate student loans after your grace period.

And when you are interested to consolidate student loans, you should know that even if your student loans are already in repayment, to consolidate student loans is still allowed and beneficial. It is for the reason that when you consolidate student loans at this time, you already fix the interest rate on your government student loans while the rates are still originally low.

 

Conclusion

As presented, student loan consolidation can help most borrowers in many ways. But, it is still necessary to note that rates won’t actually stay low without end. In fact, they are so low now and the only place for rates to go is up. So, if you are on your way out of college, saving every cent you can in today’s tough job market is worth considering. And, regardless of the situation you are in to right now, consolidating your college loans is a practical decision.

 

Student Loan Consolidation – Why You Should Do IT?

How Student Loan Consolidation Works

Student Loan consolidation works like most consolidation programs. A lone lender takes on the various loans you have accumulated, like Stafford, Perkins, HEAL, NSL, and private loans. While the terms and repayment conditions vary among these many various lenders, a single loan consolidation company will settle all these loans and offer you a solitary, typically longer term, loan. What this implies practically, is that rather than needing to settle one loan in 3 years, another in 5, and another in 10, or having one loan’s interest rate be fixed and another variable, all your loans are compiled under a lone system. You can then negotiate with your loan consolidation lender, about the terms of the loan. Typically, students opt for a repayment plan of 10 to 30 years. Obviously, the longer the phrase of the loan, the lower your monthly payment will be.

Why Consolidate?

Consolidating your student loans provides you with the chance to lengthen your instalments, so as to take advantage of your future earning power. It is quite reasonable for students to believe that they will earn more as their careers progress, and by extending out the length of their repayments, they won’t have to lay money out for the most on their loan while their income is at its lowest point. Another advantage of student loan consolidation programs is that they take a good number of the confusion and problems out of student loan repayment. For recent graduates who have loans from a selection of public and private lenders, keeping up with the unique terms and conditions of every loan can regularly be a little a nuisance. For these reasons consolidation is an increasingly popular option. But that doesn’t imply that it is not without its expenses.

Why Not Consolidate?

Loan consolidation of any kind, is so interesting for lenders because they may charge relatively high “consolidation” fees. While student loan consolidation is regulated better than most forms, loan consolidation businesses still manage to add considerably to the principle of the loan (that you will ultimately have to pay back) in the kind of fees. One fashion to avoid this is to insist that you be offered the opportunity to pay for ALL consolidation fees upfront. By doing this, you can ensure that you will at any rate be made conscious of the quantity of charges being imposed upon you. Another problem with loan consolidation is that by extending the terms of your loans (say from 5 to 15 years) you dramatically increase the volume of interest you pay on your loans. Your interest payments on your loans accumulate over the course of time. This implies that the longer you take to pay your loan back, the more interest will accumulate. Many students fail to notice this, because they only focus on the interest rate, and not the total amount of concern that will be paid over the life of the loan.

Student loan consolidation is a valuable tool for students who would like to delay their payments until they earn more or for people who find the pain of maintaining most of their individual loans to be too troublesome. It is essential for recent graduates to consider, yet, that these benefits, despite what lenders may let you believe, do not come without negative tradeoffs. By being aware of both the positives and negatives of student loan consolidation, you can make more educated choices about the whether student loan consolidation is the proper solution for you.

With tuition expenses rising across the country, it has in a very short space of time become increasingly necessary for college students to include debt in an attempt to get their degree. But student loan repayments are frequently hard for students to make, especially considering that as soon as possible graduates incomes are typically considerably

What you May Not Know about Consolidating Student Loans

Refinancing education loans can be so simple and attractive that many borrowers tend to overlook some critical points about student loan refinancing.  Sometimes what you don’t know can save you a great deal of money, time, and frustration.  Below you’ll find a few little know facts that can save you big bucks when refinancing your education loans.  

Consolidation Loans have a fixed interest rate versus a variable interest rate

Most education loans have a variable interest rate which can mean significant changes in the monthly payments if interest rates increase as they did on July 1st, 2006.  With a fixed interest rate, the monthly payments and total payoff balance is a set amount.  Some education loans such as the Perkins Loan and the HPSL (Health Professionals Student Loan) are fixed rate loans.  Before consolidating it’s important to weigh the repayment benefits of rolling these kinds of loans into the consolidation.

Consolidation lenders vary significantly in terms of money-saving incentives

What separates one lender from another when it comes to consolidating education loans are the types of incentives each offers.  Lender incentives can greatly reduce monthly payments and the total amount owed over the lifetime of the loan.  Many lenders offer incentives for auto-debit payments, but rarely more than .25%.   Another standard incentive is a 1% reduction in interest rates after 36 months of on-time payments.  When shopping for a lender to consolidate your education loans, look for one that goes above and beyond these standards.  ScholarPoint for example, offers an auto-debit interest rate discount of .50% and a 1% reduction in interest after only 24 months, a full year earlier than the norm.  

Your loans must be current in order to consolidate education loans

If you’re behind on your loan payments, you’ll need to get caught up before refinancing.  Once you refinance, you’ll most likely enjoy much lower monthly payments to ease your budget once you are caught up.  

Private education loans and federal education loans cannot be combined when refinancing

While federal student loans are funds lent by the government, private student
oans are those offered by independent lenders and tend to have a higher rate of interest.  Those who have both types of education loans will need to secure 2 different consolidation loans.  It’s best to consolidate federal education loans first and then start the process of consolidating your private education loans.  You can however, consolidate federal subsidized and unsubsidized loans together.  They do need to be tracked separately, but a quality lender will take care of this for you.

Your deferment and forbearance limits start over when you consolidate

One of the most important benefits of education loans is that they allow students to put their loans in to deferment or forbearance status during difficult times encountered while building their careers.  When you refinance, you are essentially getting a whole new loan, meaning that your deferment and forbearance limits are reset.  

Consolidating during the post graduation grace period allows you to lock in the lowest rate

Interest rates during the grace period (6 months after graduation) are .60% lower than after the grace period when loans move into repayment status.  Consolidating before the grace period is over helps to lock in this much lower interest rate.  It’s best to start the consolidation process soon after graduation to ensure that there is adequate processing time.  You can specify that your new consolidated loan begin at the end of your grace period so that you may enjoy both benefits.

Borrowers can no longer reconsolidate student loans

For many years, borrowers have had the opportunity to reconsolidate their education loans if they were unhappy with their lender or found a better loan offer elsewhere.  As part of the Federal government’s July 1st 2006 student loan changes, borrowers now face major restrictions when it comes to finding a new lender for already consolidated loans.  Unless you plan to take out new loans that would allow you to reconsolidate, it pays to shop around and find a lender you are going to be happy with because you only have one opportunity to consolidate.

Refinancing education loans is one of the easiest ways to lower monthly bills and make paying back your college education affordable.  Keeping these little known facts in mind can save you a great deal of money and make consolidating your education loans a smooth and simple process.

When Should You Consolidate Student Loans?

If you have just graduated from college, the likelihood is that you are under a large amount of debt in the form of student loans.  You might be wondering if there is any way to reduce the amount you have to pay.  One solution for reducing your debt is to consolidate your student loans.  Student loan consolidation is similar to refinancing a house on better terms:   although the principal of the loan will not be affected, the interest rates you can lock in when you consolidate student loans to a fixed rate can be substantially better, reducing your monthly payments by up to forty percent.  Plus, you might be able to stretch out your payment time to reduce your monthly payment amount even further.

The disadvantage when you consolidate student loans during your initial six-month grace period is that you must start making your payments right away.  This can be difficult if you have not found a job after graduation, although you can wait until just before the grace period ends to consolidate, and still receive the lower rates.  Furthermore, once you have consolidated your student loans, you cannot un-consolidate them again, so make sure to consider your choice carefully.

How is Interest Calculated When I Consolidate Student Loans?
When you consolidate student loans, your lending company pays off your government loan and issues you a new loan under its own name.  The typical way to determine the interest rate on the new loan is to take the average interest rates on all of the student loans, and offer a new rate that is an eighth of a percentage point higher (up to a maximum interest rate of 8.25%).  Although agreeing to a higher interest rate might not sound like a good reason to consolidate student loans, this rate is fixed over the life of the loan, whereas the government rates will fluctuate.  Since rates are at an all time low right now, locking in the current rates might be a good idea.  Furthermore, many banks give you ways to bring down the percentage rates.  For example, some lending institutions will drop the rate by as much as a quarter point if you agree to automatic deductions from a checking or savings account, whereas others drop the rates after a certain number of timely payments.  As an additional bonus, there is no penalty for paying off your consolidated loan early.

When Would You *Not* Want to Consolidate Student Loans?
Before you decide to consolidate student loans, you should carefully consider your alternatives.  For example, did you realize that it might be possible to have your student loan cancelled altogether?  Student loan forgiveness options include volunteering, for the Peace Corps for example, or working for the government in a low-income area as a teacher or doctor.  Cancellation is not possible, however, after you have consolidated your student loans.  If this kind of work interests you and is available, it could be a better option than loan consolidation.

Another time to hesitate before you choose to consolidate student loans is when you are close to finishing your payments.  Stepping up the payments and saving yourself some interest and the hassle of consolidation might be more advantageous to you.  

Finally, there are loans that you might want to keep open because they offer special advantages.  For example, if you are considering going back to school and you have a Perkins loan, you would not want to consolidate that with your other student loans.  The government will pay all interest on Perkins loans while you are in school, but if you have chosen to consolidate student loans, you will not be able to receive this benefit.  You could always choose to leave any special kinds of loans out of the consolidation mix, however.

Students Loan Consolidation – How To Get The Most Savings

The aim of student loan consolidating is to help your overall financial picture; whether that means lowering payments, improving a credit score, or reducing debt to income ratio. Student loan consolidating packages offer a few of the best money-saving incentives in the loan industry. Understanding how these different incentives affect your repayment can assist you to make a clever alternative when it comes to student loan consolidating.

The Effect of Interest Rate on Student Loan Consolidating

This tiny little number has the largest overall financial impact in regard to the whole amount you will expend to repay your student loan. Even a fraction of a portion point can equate to 1,000’s of dollars over the lifetime of a loan.Advertised base rates of interest for student loan consolidating are similar from one company to the next. Your due diligence in shopping for a lender to handle your student loan consolidating will truly pay back when you start to compare monthly interest reduction opportunities.

Interest Rate Reductions

Monthly interest reductions are money saving incentives offered by businesses that specify in student loan consolidating. Not every lender offers monthly interest reductions, and people who do supply a wide range of percentage savings. With a little research, you can discover lenders offering total interest reductions of up to 1.5%.

On Time Payments Interest Rate Reduction

If you are intending to making your repayments punctual anyway, why not be rewarded? Some lenders offer interest rate reductions just for producing on-time payments. Some lenders such as ScholarPoint offer a reduction of up to one full percentage point after only 24 months of on-time payments.

Be mindful of the amount of months the lender requires before qualifying for this discount. A reduction applied after 36 months into your loan in preference to 24 months means you’ll be paying higher rates than essential for one full year.

Auto Pay Interest Rate Reduction

Because payments made punctual are so important, some lenders will reward you with a pursuit rate reduction simply for having your payments automatically subtracted from your account each and every month.

Many lenders and government programs provide reductions at a rate of 0.25%. All the same, with just a tiny research, you can discover auto-pay interest rate reductions of up to a full 0.5%. For the borrower, this is a triple win. It signifies less paperwork, no worries about late payments, and a substantial amount of savings over the path of the loan period.

Principal Reductions

A principal reduction is when the lender handling your student loan consolidating subtracts a limited percentage off of your loan balance. Each lender offers different directives for qualifying for their principal reduction benefit. The most commonplace incentive provided is for completing a set number of consecutive on-time payments.

Principal reductions alter from interest reductions in that the savings is put on to the remaining balance on your loan but does not affect the interest at which you will pay off the balance. While principal reductions may firstly appear to be a larger savings, you could pay more than if you’d picked out a lender offering an apparently small monthly interest reduction.

Cash Back Programs

Cash back programs are exactly as they sound. After a certain number of consecutive on-time repayments, usually 33 months, some student loan consolidating businesses will return up to 1% of your original loan and credit this to your remaining balance.

When a cash back incentive is applied, money is actually a subtracted from the remaining balance after meeting the guidelines of your student loan consolidating lender. For instance, after qualifying for a 1% cash back incentive on your $30,000 loan, your present balance would be reduced by $300.

Choosing a Company to Handle your Student Loan Consolidating

Many of the incentives offered are rewards for favorable repayment behavior and are presented through various types of savings packages. Using a Student Loan Consolidating Calculator online can help you calculate the possibility savings of your options.

By comparing the options and savings incentives of different student loan consolidating lenders before making a conclusion you can put away thousands of dollars over the path of your repayment term.

 

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