The article gives an analysis of Student Loan Debt Consolidation. About close to 50% of all graduates from colleges leave school along with federal or private loans. In fact the average student from U.S.A is burdened with minimum $ 10,000. For fresh graduates, this is a substantial burden for which taking a student loan consolidation can be a smart way of dealing with it. The student loan consolidation program is indeed a convenient option for a graduate requiring debt help.
Student debt consolidation loans refer to techniques of simplifying the finances. Here the borrower pays for a single and affordable repayment every month.
– Reduction in monthly repayments: Student Debt Consolidation Loans generally bring in a combination of lower rates of interest thus helping to reduce the amount of payment each month.
– Lower rates of interest: Student debt consolidation with a loan helps in reducing the total interest amount provided the loan term is not modified.
– No direct contact with any creditor: Creditors generally harass the debtors by calling up relentlessly on account of nonpayment. Student debt consolidation loans provide a welcome relief from the nonstop harassment by creditors.
– Better money management: Student debt consolidation loans help to avoid any additional charges and simplify financial management. It provides true peace of mind.
– Regular and consistent payments: By transforming a variable rate loan into a fixed interest loan, the borrower will have clear knowledge of the exact amount for repayment each month.
– Interest payments: If the government is paying interest on the existing loan, the trend will follow even after consolidation.
– Flexibility: There is the possibility of consolidating one or several loans. There is no compulsion of combining all.
While student debt consolidation loans come with certain definite advantages, there are a few disadvantages too. Extending the loan term is beneficial in the short term as it offers reduction in monthly repayments. However, in the long term it actually means extending the debt and paying more interest over full term. Students generally get a false feeling of security as there is a reduction in monthly repayments. This leads to unpaid car loans, credit card debt and different borrowing sources being used. Those with poor credit history will find that the interest rates are higher in this kind of loan.
Important things to know
The charges relating to student debt consolidation loan vary according to each vendor as well as the credit history of an individual. Before going for a consolidation loan for student debt, take care to ensure that your credit record is in perfect shape. Take concrete actions to fix problems with regard to your credit report. It is best to do a comparison of rates from various lenders. Rates for refinancing of federal students loans change every year once during the first week of July.
Every lender has different criteria for giving a consolidated loan for student debt. Majority of the lenders want that no loan is “in-school” category, which means you must not be presently paying for your education with the help of an “active student loan”. Also some lenders have a requirement of a minimum balance, though that balance amount varies.
You should ideally do some research beforehand to find the right student debt consolidation loan.