Private Student Loan Consolidation
After graduation, students head out
into the world with a degree and a dream of landing their perfect job –
and often a lot of student loan debt. Since this debt can affect their credit
rating and their ability to get loans in the future, it is essential to get it
paid off in a timely fashion. Private student loan consolidation is one
way to do this.
First, it is important to consolidate your federal loans
separately. This is because federal consolidation combines all loans into
one and reflects a positive payment history which will improve your credit score.
Improving your credit score will give you a better rate for the private loan consolidation,
which is credit-based. That way you will get the best deal and lowest monthly
payments for both loans.
There are several benefits to consolidating private
loans. Doing so combines all of your private loan debt into one loan, which
can reduce your monthly payment. This consolidation can also improve your
credit score, and you can sometimes get interest rate reductions for on-time and
automatic payments. Private student loan consolidation is for anyone with
non-federal education-related expenses who is also a U.S. citizen or permanent
resident. Loans will usually be available for $5,000-$275,000 – though
sometimes more can be borrowed with a cosigner - and can have a repayment period
of 20-25 years, sometimes longer, depending on the amount. Parents can consolidate
loans for more than one student, and spouses can consolidate their loans together.
research online can help you if you are still confused by the whole private student
loan consolidation process. There are websites that can help you understand the
process. There they allow you to compare different types of federal and
private consolidation loans and apply online. They even offer a frequently
asked questions page that gives you all the details of private student loan consolidation
programs quickly and easily.
For instance, you can look up and see if having
a co-signer will help you get a better interest rate and waived disbursement fee
on the loan. It also discusses the type of loans that can be consolidated,
why you should consolidate federal student loans separately, and the ineligibility
of 1098-E eligible loans for consolidation.
Depending on the lender, you
generally have to wait until after graduation to consolidate your student loans.
However, some lenders will allow you to consolidate one month prior to graduation.
If your private loans have grace periods before you have to start repaying them,
you can apply for loan consolidation during this period.
There are a few
disadvantages that should be considered before private student loan consolidation.
Depending on when you decide to consolidate, you may give up any grace periods
on the loans, since payments on the consolidation loan usually start a month after
approval. Also, if there are any repayment benefits, such as interest rate
reductions for on-time payments, that have not been received, they will be lost.
Plus, by extending the repayment term and making smaller monthly payments you
will end up paying more over the life of the loan. All of these things should
be considered before you make the decision to consolidate.