With college tuitions steadily on the rise, more and more people are unable to pay for post-secondary education out of their own pockets. Most students will apply for at least four separate loans during the length of their school term. Both Federal and Private student loans can, and should, be consolidated by way of a school-consolidation loan.
A school-consolidation loan is perhaps the best type of loan you could hope to have. With a school-consolidation loan, you'll be able to pay off all of your existing student loans from the credit you'll receive from the new loan. By doing this, you're reducing the number of creditors, monthly payments and interest rates you have.
Most school-consolidation loan interest rates will either match or be lower than your current student loans. If you've taken the time to ascertain exactly how much you'll actually be paying just in interest fees, you'll know that any decrease in interest could potentially save you thousands of dollars. This is due to the fact that, in all likelihood, it will take you at least a few years to be able to pay off all of your loans. A $10,000 student loan at a 10% interest rate will accumulate $1000 per year in just interest. Over four years that's $4000. A school-consolidation loan at say 7% would reduce that to just $2800 over four years, easily saving you $1200.
Another great benefit of a consolidation loan is the fact that you'll no longer have to deal with multiple minimum payments. This can be difficult to manage, especially if you have 8 different payments to make, all at different times of the month. With one simple bill, you're much less likely to miss a payment and will be able to budget your income that much easier.
You'll need to get separate school-consolidation loans if you have both Federal and Private student loans. With Federal loans, the biggest advantage of consolidating is the fact that nearly all Federal loans don't have a fixed interest rate. Consolidating will lock you onto a single interest rate, thereby saving you money when that lower Federal student loan interest rate fluctuates to the high side.
Perhaps the most helpful benefit of a consolidation loan is the fact that you can negotiate repayment terms to a length of up to 30 years. This will greatly reduce your minimum monthly payment if you feel you won't be able to pay it off any sooner. Be warned, though, the total interest fees of a 30 year loan compared to a 5, 10, or 15 year loan are significantly higher.
To be eligible for a school-consolidation loan, you must not be attending classes. When you apply for the loan, you typically won't even have to have a credit check. Therefore, your current credit rating will not be a determining factor as to whether or not you're eligible for a guaranteed consolidation loan.
Summary:
School-consolidation loans are available to students who're no longer regularly attending classes. These loans combine your existing student loans into a single loan, making it easy to manage and instantly improving your credit score while reducing the amount of interest charges you'll pay.
Many folks are looking into new options when it comes to paying off their federal student loans. Though the traditional plan for paying off a student loan includes waiting until one leaves school, there are some different options available for those who have a more ambitious plan. Is prepaying your school loan or paying it off a little bit early a good plan of action? That entirely depends upon your financial situation and what sort of job status you are looking at.
The nice thing about student loans is that they feature an extremely low interest rate as compared to other forms of credit. This was done specifically by the federal government to push for more higher education for all students. With that in mind, there is a great deal of incentive out there to just wait to pay the balance of the student loan when getting out of college. This is a particularly good idea for any person that figures to get a high paying job when they get out of college. Within five to ten years, the loan can be paid off in full without a whole lot of trouble.
Some people, on the other hand, won't make quite as much money when they get out of college. In those cases, it might make a little bit more sense to get the loan paid off as quickly as possible. If you aren't scheduled to make a ton of money after school, then you will have to spend more time paying off the loan. This means that interest fees are going to add up and cause you to pay a ton more than you need to over time. So what is the solution for these folks?
Prepaying a portion of your student loans is a good idea because it can serve to lower you interest rates on the student loans. This is similar to a mortgage loan in which case, you can pay a higher down payment in order to get a lower interest rate on the long haul. Though if you can prepay an entire student loan, you don't really need one, there is some merit to paying a little bit down on the loan. This is important because it enables one to go ahead and score a low rate that will benefit you for a long time to come.
For folks that envision having a difficult time paying off their loans in a short period of time, the present is more important than ever. Use whatever means you can to round up some money and shop around for various mortgage loan lenders. This is one of the best ways to exact long term change for your financial situation and get through college.
Both Brooke Hayles & Glen Orenstein are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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