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Student Loan Consolidation

Student loan consolidation allows you to roll all your student loans into one new loan and often times you can get a smaller interest rate that is fixed. There are pros and cons to consolidating though.

Consolidating allows you to pay your loans with one payment instead of having multiple payments to make if you went with different companies. If you are getting a lower interest rate, you can save money in the long run. However, pay close attention to the length of the new loan. If the lender extends your repayment period, you may end up paying more money in the long run, even with a lower interest rate. In that case, if may be best to stick out your current loans.

Also, check with your lender (s) to see if they have incentives for staying with them. Some places offer lower interest rates if you make a certain number of contractual on-time payments. If this is the case, it may be beneficial to wait on consolidation until your rates drop due to paying on time.

Another thing to think about is the range of you loan interest rates. The lenders get your new interest rate as a weighted average of your current rates. If one of your loans' rates is significantly lower, it could affect your new loan interest rate and you may want to keep it out of your consolidation. And from my own personal experience, some loan companies may not want to "sell" their loan to another company for consolidation. They need to keep a certain quota and selling the loan could result in them falling below that quota. It may be beneficial to look at the company's history in advance.

Consolidation can be a good thing given the right circumstances. Just be careful and make sure you understand all the terms and conditions ahead of time.

Source by Jaspal Tatla

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