What does it mean to consolidate your student loans?
To consolidate your student loans means to take all of your various loans and give them to one company. One benefit of this is that, often, you can get a lower monthly rate.
Consolidating your student loans has other benefits. Listed below are a couple more of them:
-Only one payment: Consolidating simplifies your finances by allowing you to write only one check instead of several checks.
-Spend less: Find a lender that will charge you a lower monthly interest rate and let them consolidate your loans.
-Helps build credit: At the time you consolidate, your new lender will repay your previous loans and merge them to make 1 new one. Because your former loans were fully repaid, your history looks better which, consequently, improves your credit rating.
-Lock in interest rate: When you consolidate your interest rate is locked in. This protects you from future interest rate increases.
Consolidation loans are great because they are easy to get. You don't need to be employed or have collateral or a cosigner to consolidate your loans. You don't even need good credit!
The Problem With Consolidation:
There are usually disadvantages to every decision. Check out all the pros and cons of consolidation before you do it. Here are a couple disadvantages you may want to consider:
-Interest rates fall every now and then. If you have consolidated, you are stuck with one rate.
-Once you consolidate you cannot "unconsolidate".
-The consolidated loan will have new terms and conditions that your other loans didn't.
-If you choose to extend the life of the loan you will wind up spending more (in interest) than you would have.
Since we have reviewed the benefits and disadvantages of consolidating your student loans, you should find out if you are eligible for one. To be eligible for federal student loan consolidation, you must meet a couple requirements. You have to have at least ten thousand dollars. You must be graduated as well. Finally, you must repair any defaulted federal loans before you will be allowed to consolidate.