Knowing When to Consolidate Student Loans

Knowing when to consolidate student loans will be important. If you consolidate too early you are essentially throwing money out. If you wait too long you can end up in a financial mess. Consolidating student loans can be a great benefit if you do it right.

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What is Consolidation

Consolidation of student loans is simply taking another loan to cover the older ones. The process isn’t complicated, but it can sound it. When you choose to consolidate student loans you should understand the process. The new loan will pay off the old loans. Instead of making multiple payments to several banks, you will simply make a single payment to a single source to cover the new consolidation loan. The benefit is you make less payments and end up with lower monthly payments.

Federal versus Private Loans

Federal student loan consolidation has to be handled separately from your other loans. You can find programs through the federal loan programs that will help you with the process. With private student loan consolidation you have more freedom. When you consolidate student loans on a private level, you have the option to choose from numerous banks that offer these programs. You’ll have to do some research to find the best program for your needs.

What You Should Know Before you Consolidate Student Loans

Before you start trying to consolidate student loans, you should understand what you will need and what requirements there are. In most cases you will need to be current on existing loans before you can get approved for student loan consolidation. If you foresee an issue coming up with paying your loans, call before you get behind to ask for a deferment. This way you will be able to qualify more easily. If you have been current and in good standing on your current loans for at least a year you shouldn’t have any problems trying to consolidate student loan debt. You need to have your bank records, as well as payment records for any student loans you are currently paying. It’s also a good idea to spend some time finding what the average student loan consolidation interest rates are. This will allow you to shop around for a better rate.

Also, keep in mind that different terms will be available with different lenders. A short term will allow you to get rid of debt faster, but will usually have a higher monthly payment. Longer terms will lessen your monthly payments and are good when you are in a bind. The longer term will cost you more in the long run with interest, but can still be a good solution if you need to free up some money each month. Refinancing consolidated student loans may also be a possibility if you need to free up cash now but don’t want to pay on a long term basis. Once you are out of the financial crunch you can look in to altering the terms on the refinanced student loan to pay it off faster. Finding the right way to consolidate student loans will only take a short amount of time and can be a tremendous help.

 

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