Why Should I Consider Consolidating Student Loans?

November 11, 2011 by  Filed under: Loans 

Nearly anyone that has ever attended a college, or another higher-education institution, has taken out student loans. Often times, these financial advances are considered a dual blade: a blessing, as they are the means to an end, and a curse, since they are often tricky to receive and difficult to pay off. However, educational loans do not have to be a burden you carry well into middle age; consolidating student loans is an excellent way to save money and make your life simpler in the process.

What Does Consolidation Mean?

Consolidating student loans refers to the actions and results thereof that an individual takes to merge their loans into one lump sum. For example, instead of having three separate loans from various lenders at differing rates, one student loan consolidation company will step in and purchase all of these loans. Thus, the three loans are now combined into one with a single interest rate and repayment plan.

It’s important to note that not all educational loans need to be consolidated. Referring to the previous example, if two of the loans have outrageous interest rates or an unrealistic payment plan while the other has a low-fixed rate and reasonable payments, the individual can choose to consolidate only the two that will benefit from the transaction. Adding the third loan can result in paying more interest than was originally intended for that particular loan. Remember to review all of your student loans terms and conditions before approaching a consolidation lender so that you are prepared to consolidate only the loans you find will profit from the transaction.

Why Should I Consider Consolidating Student Loans?

There are several factors used in determining of what each individual student loan consists. The average student will have numerous loans from different lenders at graduation – consequently, each loan will have dissimilar repayment plans, differing payment amounts, and various interest rates. All of these examples are excellent reasons to consider student loan consolidation. As a result of consolidation, monthly payments are typically lower and the student will save money on the total interest from their combined loans.

What are the Requirements?

As a rule of thumb, there a few guidelines to follow in order to be eligible for consolidating student loans:

1. The educational loans qualify for consolidation – this applies particularly to federal loans since not all of these credits are eligible by default.

2. The combined outstanding balance exceeds a certain benchmark total – this amount varies according to lenders.

3. The loans must be in good standing with the current lender – it cannot be in default or arrears.

4. The student has dropped out of school, graduated, or enrolled for less than what is considered to be half-time (usually only six credit hours per semester).

5. An individual can only consolidate the loans that are issued in his name – any loans taken out by a different borrower on the student’s behalf cannot be included.

Please note that specific requirements vary by lender so be sure to contact each to determine their exact conditions.

Consolidating student loans can produce bountiful results; review your educational loans to determine if you can benefit from merging your loans into one account.

Know more reason why we need to consolidation our student loans.

Article Source:
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