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By Susan Willis
Without the ability to get financial aid such as student loans, grants and scholarships, most college and graduate students would not be able to afford school. The opportunity to have access to these financial instruments is a wonderful gift, thanks to the U.S. student loan system as sponsored by the U.S. Department of Education and supported by many private lending institutions.
Of course, in the case of grants and scholarships, there is no need to repay anything during school or after graduation. However, in the case of loans, the debt can last for years or even decades after graduation.
Student loan debt can easily surpass $100,000 for many students. Monthly payments can be so high that they make it difficult for the grad to purchase a home or meet other monthly financial obligations.
Furthermore, many students have taken out multiple student loans over the course of their college careers. This means having to repay multiple lenders each month and manage multiple payments.
If this describes you, one solution for simplifying your loan situation while lowering monthly payments is to consolidate your student loans. Through consolidation, you end up with just a single loan payment to make each month. And, by stretching those payment out over more years, you can also reduce your monthly payment amount by quite a bit.
When Interest Rates Make Sense, Consolidate?
Consolidation can be a wonderful thing, but it is not for everyone. For example, if you already have a long repayment term of 20 to 30 years – or if you already have a very low average interest rate across all loans – it may not make sense to consolidate.
However, if your current terms are 15 years or less and you think you can get a lower interest rate, consolidation may be just what you need.
Student Loan Consolidation & Credit Rating
If you have federal student loans you will want to apply to the federal loan consolidation program. In this case, your credit rating is not taken into account at all when your new interest rate is calculated.
However, if you have private student loans, you will need private consolidation. Your new rate will be a function of two things: the current prime rate (or LIBOR rate) and your credit rating. The better your credit score, the better your chances for qualifying for a low rate.
Tips For Getting The Best Interest Rate
Here are 5 tips for getting the best-possible interest rate for you:
1. Find out the current prime rate or LIBOR rate: Start by researching the current standard interest rates like the prime or LIBOR (which stands for London Interbank Offer Rate). These are rates that private consolidation lenders take into account as a baseline – along with your credit score – to determine your new rate.
2. Find out your current credit score: Check with all three of the major bureaus, since your score will likely vary from one to the next.
3. Build a list of multiple lenders who specialize in student loan consolidation: Remember, when it comes to shopping for a great rate, make the lenders compete with each other for your business. Start with a list of at least 5 to 10 lenders. Write down their vital stats like contact info, website address, etc.
4. Contact each lender and ask for their best rate: Now, contact at least 5 of these lenders and apply for a consolidation loan.
5. Reject the first offer you receive from each lender: Once you receive offers, reject the first one they offer you: they may just come back with a better offer, and it’s always worth a try.
If the interest rate is right, student loan consolidation can be a great way to lower payments and simplify your financial life.
About the Author: Get a list of student loan consolidation lenders with the best interest rates at:
Best Student Loan Consolidation Rates
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Source:
isnare.com
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