Are you attending college or a recent graduate? If so, chance are that you have student loans. Student loans are a great source of financial aid for students who need help paying for their education. Unfortunately, students too often leave college with debt. Additionally, they often have multiple loans from different lenders which is difficult to keep track of. The solution to this problem is loan consolidation.
So, What is Student Loan Consolidation?
Student loan consolidation means bundling all your student loans into a single loan with one lender and one payment plan. You can think of loan consolidation as similar to refinancing a home mortgage. When you consolidate your student loans, the balances of your existing student loans are paid off, with the total balance rolling over into one new consolidated loan with a single provider. The end result is that you have only one student loan to pay on.
When should I consolidate my loans?
A question that is commonly asked is, "when should I consolidate my loans?" You can consolidate your student loans any time during your six-month grace period or after you have started repaying your loans. If you consolidate during your grace period, you may be able to get a lower interest rate. However, since you will lose the rest of the grace period, it is a good idea to wait until the fifth month of the grace period before consolidating. The consolidation process usually takes 30-45 days.
Considering whether or not loan consolidation is for you?
Loan consolidation offers many benefits. Some of these benefits include:
- A fixed interest rate that is usually lower than what you were previously paying for your loan, saving you thousands of dollars (depending on the interest rate of your original loans)
- Lower monthly payments
- Combining your student loan payments into a single monthly bill
Additionally, consolidated loans have flexible repayment options and no fees, charges, or prepayment penalties. There are also no credit checks or co-signers required to consolidate your student loans.
You should consider consolidating your loans if the consolidation loan would have a lower interest rate than your current loans, particularly if you are having trouble making you monthly payments. However, if you are close to paying off your existing loans, consolidation may not be quite worth it.
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