So you’ve gone to school, college or university and now you are stuck with a ton of debt. This isn’t a good situation at all, is it? Well, it’s not as if you can’t do anything about it. There’s a lot you can do – you can seek a federal student loan consolidation.
About Federal Student Loan Consolidation
If you have more than one federal student loan you are paying on, federal student loan consolidation can help bring all of them together into one. Doing this is quite simple.
A consolidation company will take all of your student loans and pay them off for you with a loan you will apply for and hopefully, get approved for. Once all of your loans are paid for, you will have one loan to pay back.
This can make things much easier on you as it can get confusing when you have to dish out money to many different places.
The Benefits of Federal Student Loan Consolidation
Being able to pay on one loan instead of multiple ones isn’t the only advantage you’ll receive from the student loan consolidation process. You will receive other benefits as well such as…
Lower Interest Rates
When you consolidation a student loan , you may be able to find a consolidation loan that has a lower interest rate than what you were paying before. With this lower interest rate, you save money.
How do you save money? Simply by not having to pay as much to the loan company but instead paying more on the principal.
When you pay more money on the principal, you will end up paying the loan off sooner. That should be music to your ears.
Lower Monthly Payments
Many people turn to consolidation because they can’t afford the monthly expense of their current bills. To help this situation, consolidation loans give people lower monthly payments.
With lower monthly payments, you will be able to budget better. It will also decrease the risk of defaulting on your loans.
Improved Credit Score
With loan consolidation, you will have a better chance at paying your bill each month. You will also pay it off quicker due to more money going towards your principal.
Paying on debts is the best way to improve your credit score. Since you have this huge debt that needs paying off, the credit companies will give you a favorable rating for being financially responsible.
The Down Side of Consolidation
Some people will tell you not to consolidate because it will cost you money. Yes, it does cost money to have your loans consolidated; however, will it cost you more money or less in the long run?
The answer is most likely not. When you choose a federal student loan consolidation, you should compare consolidation companies. Each one has their own pricing and you can probably find a company with a good rate that will make this decision a wise one.
How to Get Started
After comparing federal student loan consolidation companies, it’s time to decide on one. Choose the one with the best rate and most services.
Once you have a company, you can then set up an appointment with the debt consolidator. You will need to bring the following:
- Information about your income
- Information about your debts and expenses
- Your ID and social security number
When you sit down with the debt consolidator, he or she will look at your income and compare it to your expenses and debts. They will then check your credit. This will enable the consolidator to figure out what your options are with student loan consolidation.
Once you have your federal student loan consolidation loan, you will pay off all of your loans with it. You will then meet with your debt consolidator, who will help you set a budget to make sure you can pay your monthly premium for the loan.
From here, you will continue to pay the monthly statement. Once you do pay it off, you will feel relieved. This is all possible for you. All you need to do is make the first step towards getting a federal student loan consolidation.
How Student Loan Consolidation Can Help You
Cheri Ashwood is a guidance counsellor and she talks to people about consolidating student loans.
If you consolidate your loan you lump or roll the loans into one. When you began college or university you may have thought you have taken out loans to help you educate yourself but in reality what you have is a number of financial loans. These usually have been awarded to you either yearly or on a per semester basis.
Interest rates vary depending on what is on offer at the time. You will always find companies offering student loan consolidation. What happens is these companies pay off your existing loans and offer you two choices which are:
- Delayed payments or a deferment period or:
- A lower interest rate
Cheri has student loans herself and consolidated so she can pay a yearly interest rate of 3.5%. The monthly payment is lower and the overall amount I pay off will be less. Student loan consolidation is even better if you can secure a fixed interest rate.
Other student loans can be offered at a variable interest rate which means the interest rate and your payments vary. So perhaps you should seriously consider consolidating your student loans before you graduate. That way you’ll graduate with peace of mind and a clean slate.
The Insure Future Team