Student loan consolidation interest rates are subject to various changes. It is possible for a loan to incur two different interest rates in the loan term, in that one rate is calculated during the students time in school and the other kicks in once the student graduates.
Consolidation loans have longer terms than other loans.
Students can choose terms of 10-30 years. Even if the monthly payments are lower, the sum amount paid over the loan term is higher comp aired to other loans.
Fixed interest rate is calculated as the average of the interest of the loans being consolidated, assigning relative amounts borrowed, rounded up. Some loan policy features such as the grace period for re payment are lost and do not reflect on the consolidation loan.
These make them not suitable for all borrowers.Student loan consolidation interest rates is tied to one or more financial indexes.
For instance students with good credit scores or from families with good credit history get loans at cheaper interest rates and smaller origination fee.money paid out in terms of interest is now tax deductible.
This is a fact tat most lenders omit to tell potential clients so as to avoid comparison with other lenders in the market.
In some cases lenders give rates which are very low but fail to tell the borrowers that the rates only apply to those people with good credit scores thus they find themselves paying up to six percent more, than the advertised amount nine percent higher loan fees and two thirds lower loan limits.
Student loan consolidation interest rates also varies depending on the type of loan applied for.
They are two major types namely school channel loans and direct to consumer private loans. the school channel loans are certified by the school thus offer lower interest rates however they take a longer period to process and are directly disbursed to the school on the other hand direct to consumer private loans carry higher interest rates but are accessed very quickly.
The argument behind this is that the convenience is offset by the risk of student over borrowing or misuse of funds.
Student loan consolidation interest is also determined by the buying factors, such as the perceived risk of lending to the individual as well as the financial indexes they are attached to such as stocks and money markets current trading trends.