There are two types of student loans: federal and private. Federal student loans are supplied through the U.S. government while private student loans are obtained through banks, credit unions and other lending companies. Loan consolidation is the process of combining multiple loans into one loan with a lower interest rate. There are many benefits to working with private student loan consolidation companies as this can help reduce your monthly payments by either reducing your interest rates or extending your loan over a longer period of time. Some loan consolidation companies work with either federal or private student loans and others may work with both.
Those seeking to consolidate their private student loans will find that there are several options available. By consolidating multiple loans you can reduce the amount of payments made by replacing each loan with one, single loan. This in itself offers the greatest advantages as you instantly reduce the amount of interest as multiple loans each have their own interest rates and fees. The number one advantage to working with private student loan consolidation companies is the ability to manage your payments by reducing multiple loans to one.
Loan consolidation is a great option for those having difficulties with their budget or repaying multiple loans. You can consolidate your loans to one making it easier to repay and removing the confusion that often ensues when paying multiple creditors. New students who have just graduated from school may find that with the pressures of obtaining work and starting their new lives, the added pressure of dealing with multiple student loans can become a great source of frustration, stress and anxiety. Loan consolidation can reduce much of the trepidation associated with student loans and reduce your overall debt, making it more manageable.
When speaking with private student loan consolidation companies discuss the possibility of having your rate reduced. Many companies that offer loan consolidation will base your new loan upon your credit score. Those with co –signers who have excellent credit scores may find that their new loan comes with significantly lower rates, due to the credit worthiness. Loan consolidation can allow borrowers to repay their loan faster by making additional payments that are applied to the principle instead of interest.
Ask the company about various plans for deferment related to internships, residencies and military. Many companies will have plans in place for those that need to have their loan repayment deferred.
Credit scores play an important role in the amount you will pay and it’s important to ensure that you have a good credit history and rank when seeking loan consolidation. Those with multiple student loans who improve their credit are not offered lower rates or interest fees on existing loans. It is only through loan consolidation that you can take advantage of the benefits of your improved credit score. Take the time to build up your credit and maintain good credit history as this will significantly reduce the amount owed when you seek loan consolidation.
When choosing loan consolidation companies inquire as to whether there is a minimum amount your loan must be in order to qualify. Many private student loan consolidation companies also have a maximum amount that you may qualify for. Determine whether or not there are application or origination fees and look for a company that bypasses these. You’ll find that consolidation companies are varied so you’ll want to perform your research and compare companies. Choose the company that offers the best, competitive rates and doesn’t have prepayment penalties so you can pay off your loan as quickly as possible.
Private student loan consolidation offers many benefits and advantages. Take the time to research different companies and choose the lender that best meets your needs. Once you consolidate your loans be certain to make timely payments as this will greatly impact your credit rating and prevent you from defaulting on your new loan agreement.