Opt for consolidation to bundle your student loans into a single one
Have you borrowed money from several lenders to fund your college education? After finishing college do you find yourself buried in burdensome debt? Are you having difficulty in making more than one loan repayment each month? If answered yes, then you can get out of this financial problem by opting for loan consolidation.
Student loan consolidation - What it is
When you opt for a student loan consolidation program, all your outstanding loan balances will bundled into single loan and you will have a new repayment plan. So, instead of writing multiple checks, you will now have to make a single payment. The payment amount may also become low if the lender agrees to offer you the loan at reduced interest rate. Your parents can also opt for this program, on your behalf.
The interest rate for your new consolidated loan is usually calculated by taking the average of the interest rates of all your existing loans. Then it will be rounded up to the next one-eighth of one percent. The maximum interest rate is 8.25%.
How to apply for the loan
To take advantage of a consolidation program, you can take help of any bank or credit union. You can also contact the U.S. Department of Education and get it directly from there. However, it would be even better to first check with the lender, from whom you have taken your current loan. The whole consolidation process generally takes around 30-45 days.
Eligibility criteria for loan consolidation
You need to meet the following eligibility criteria, in order to get approved for the loan consolidation program:
- You should have more than one lender
- Your total outstanding loan balance is more than $7,500
- You are in 6-month grace period following your graduation or have started repaying your loans
- You have not already consolidated your loans
Benefits of consolidating student loans
The advantages for consolidating student loans are:
- You will have to make lower payments each month
- After making several payments, your credit score will improve gradually
- If you have improved your credit, you will have lower interest.
- For a graduate borrower the repayment term will be upto 30years, whereas, for an undergraduate, the repayment term is upto 25 years.
Prior to opting for the consolidation program, you should make sure that the interest rate for the new loan is lower than that of your existing loans. You should also shop around and compare the quotes offered by different lenders, so that you can choose the one, whose rates and other terms and conditions suits your pocket the most.
