If you are in college or have graduated, you know all about student loans and the many different loans you had to take out to afford your college education. Some of you have borrowed small sums – you went to a state funded college or you received significant scholarships. While some of you received little to no financial aid and are burdened with a huge college debt. What ever your case, you need to know about student loan consolidation.
What is student loan consolidation?
Simply put, all of your student loans get grouped together and rather than making four or five small payments, you make one large payment – once a month. There is nothing magical to this. Think about if you have two car loans and you combine the two loans to have just one payment. If you do this, you will have just completed a car loan consolidation. With a student loan consolidation, you are doing the same thing with your multiple student loans – even if the loans were taken out from different lenders!
What bother with loan consolidation?
There are several reasons to consolidate your student loans:
One, as mentioned above, is to combine the loans from different lenders so you only have to deal with one lender and have just one payment. Simple is good!
Two, by consolidating your student loans you will receive one interest rate, which if it is lower than your original rates on the multiple loans you had, you will actually save quite a bit of money over the life of the loan. Saving money is good!
In addition, you can spread the one consolidated loan over a longer period of time and this will reduce your monthly payment – further making the monthly debt burden easier to fit in your budget. Say for instance you have three loans with payments totaling $350.00. By consolidating those loans and spreading them out over 15 years, you may be able to reduce that to $175.00 per month. Lower payments are good!
The interest rate of you loan will be fixed. This means that the amount you are charged will never change over the life of the loan. If you consolidate your student loans while rates are low – and they are historically low right now – you will have locked in your interest rate at a very low rate. And you will never have to worry about your payment going up – even when interest rates return to much higher rates!
How do I consolidate my loans?
There are numerous companies that will help you consolidate your loans. The government has programs and there are many private companies that will help you with the process. You only need to spend a few minutes on the internet before you will find a reputable company to help you stabilize your financial future with a student loan consolidation.