While consolidating your student loans will not actually cut your college costs, student loan consolidation will serve as a way of making financial aid a less stressful process (if you borrow money for affording college that you have to pay back). However, depending on your consolidation repayment plan, you can end up paying more in the end using this financial aid process as well. Here are details on the general benefits of a consolidation loan:
Benefits:
-Single monthly payment: with only a single monthly payment instead of several on different loans, consolidating your student loans will mean that making payments is less of a hassle.
-Alternate repayment plans available: While most student loans only have one or two repayment plans available, consolidating means that you have several different options and time periods in which you can pay back your loan. I will discuss these repayments plans in another post, and you will see how these financial aid options are a nice thing to have.
-Choose any lender: with the option to choose any lender, you will be able to shop around for the lowest student consolidation interest rate available.
-Extended repayment period: The ability to extend your repayment period up to 30 years will mean that paying back your student loans can be much less stressful. As a result of this extended period, consolidating your student loan will mean that you do not have to stretch your paycheck every month, because the payments will be lower. However, in the end extending your repayment period will mean that you pay more in interest.
-Lower monthly payments: as a result of the extended repayment period, you can lower your monthly payments by up to over 50%
-Fixed interest rates: with some student consolidation loans, such as the federal consolidation loan, the interest rate on the loan will be fixed for life. You will know what to expect as far as costs, and won’t have to worry about paying more than what you signed up for because of changing interest rates. This is a nice change from most private loans (and some government ones, such as the PLUS Loan), where the interest rate can vary by year.
-No pre-payment penalties: As long as you pay your entire student loan back during the repayment, you are free as to when and how you wish to cover the entire student loan, as long as you meet the minimum payment requirement each month.
-Improve credit score: an extended repayment plan means that it will be easier to successfully pay the student loan off on time, which will improve your credit in result.
-Certain loan consolidation programs can have other benefits, including no credit check, no need for co-signers, no feed, no minimum balance requirement, reduced monthly payments, and varied deferment options. I will discuss these in detail for each specific student loan consolidation program.
Jan 3, 2009
