Student Loans Consolidation

By Sam Ferdi

consolidate student loans

When to apply?

One of the most important financial decisions a student or a recent grad will make is to apply for student loans consolidation which brings numerous benefits:

• One payment each month, to one lender, instead of many payments to various lenders, each due on a different day.
• Extended repayment period. The original repayment term for most student loans is 10 years - that’s pretty steep for someone on an entry-level salary. By extending the term up to 30 years, loan payments are reduced to a level that is much more manageable on an entry-level salary.

• Reduced debt/income ratio. With student loans consolidation, your credit report will show one combined loan, usually with a much lower overall payment, which equates to a more favorable credit rating and you most likely also benefit from a much lower payment, thus lowering your debt to income ratio.
• There is no prepayment penalty for student loans that are consolidated under the federally-guaranteed program.
• Student loans consolidation can also be availed by students having bad credit history. With the help of student loan consolidation, they can increase their credit score by paying the loan installments regularly.
• With student loans consolidation, lenders not only provide you financial assistance, they also negotiate with your previous creditors in order to reduce the interest rate of your debts.

Points to keep in mind when sifting through student loan consolidation companies.

• Always go for a good reputed student loans consolidation company and avoid companies that ask for large fees upfront.

• The interest rate should be lower than the average of all your previous loan interests taken together.
• The consolidation companies prefer student federal loan consolidation as the government stands as the guarantor in case the borrower defaults.

• Before signing, make sure you have a physical checklist of everything covered in the student loan consolidation program.

Types of Student Loans Consolidation

• States will consider many types of student loans to consolidate depending on your location. Among the most popular loans they accept are: Federal Strafford Loans, PLUS Loans, Federal Perkins Loans.
• There exist other student loans consolidation programs you can apply for if you’re not interested in a state consolidation. You can search for Federal Direct Consolidation Loans or Private Student Consolidation Loans.

Federal Loan Program

It is always advisable for students to take a student federal loan consolidation program or loans that come under the federal direct student loans and qualify for federal consolidation. Federal loans make you eligible for a lock-in lower interest rate. This lock-in rate is a shield against inflation for the students. The interest rate for your loan after student loans consolidation remains constant, even if there is inflation and increase in rates of interest and repayment terms extending even to 30 years

All federal programs used for student loans consolidation are free from any fees and credit checks. This means that students with bad credit can avail a federal loan.