Reasons to Consolidate Your Federal and Private Loans

Reasons to Consolidate Your Federal and Private Loans

Loan Consolidation is an option for stuudents who have graduated or are about to graduate. Loan consolidation is the act of combining all of your Federal or Private student loans into one extended payment. If any of the following apply to you, you may want to consolidate your loans:

You are having trouble making payments. If you are having difficulty making difficulty making your monthly payments and are in danger of defaulting, consolidating your student loans may be a good option. Loan consolidation will lower your monthly payments by extending the period of your loan, making paying the bill easier.

Multiple loan accounts clogging your mailbox. Chances are if you have accepted multiple loans to pay for college, you will have multiple lenders. Receiving multiple payments from multiple lenders can make paying the bills very tedious. By consolidating your loans you need only pay one bill, making bill paying a little bit easier.

Interest rates on your loans are rising. If you accepted loans with a variable interest rate, you should consider consolidating your loans. Loan consolidation offers the convenience of a fixed interest rate. The maximum interest on your loans is 8.25%

Remember, although you are decreasing the amount of monthly payments, by extending the period of the loan you are also increasing how much you will pay throughout the life of the loan. Only you can weigh the benefit of lower payments and longer repayment versus higher monthly payments and shorter loan period.

Federal Student Loan Consolidation
Federal Loan consolidation can combine your entire federal student loans into one new loan with a fixed interest rate, extended period of repayment and lower monthly payment.

Loans from the Federal Family Education Loan Program and the Federal Direct Loan program may be consolidated. Eligible Loans include Stafford, PLUS, Perkins, Graduate PLUS, Supplemental Loans for students, Health Professions Student Loans, Loans for Disadvantaged Students, Nursing Student Loans, and Health Education Assistance Loans.

You must have at least $5,000 in student loans to qualify. The rate of your loan depends on average of your current loans. Repayment begins after disbursement on a monthly basis.

Private Student Loan Consolidation
Private Student Loan Consolidation allows creditworthy borrowers to combine one or more loans into a new loan between $5,000 and $275,000.

In order to qualify, you must be credit worthy or have a credit worthy cosigner. You must also have completed your course of study or do so within 30 days. You may consolidate between $5,000 and $275,000 and extend you repayment to up to 30 years. If you have a credit worthy cosigner, there is no maximum for the loan consolidation. The interest rate is variable and payment is made on a monthly basis.

Consolidating your loans will mean you lose borrower benefits including grace periods, deferment and forbearance. By extending the period of the loan, you make more monthly interest payments overall, but they are significantly smaller which reduces your monthly payments.