Is Consolidating Your Student Loans An Option For You?

Getting an education can be costly but the rewards are worth it. The fact that one is financially challenged doesn’t mean he cannot pursue his career dreams. Financial companies and other government bodies have always stepped in by providing students pursuing various degrees with loans. For someone who has just graduated, you probably have more than a single student loan and you are wondering how to go about it. Well, debt consolidation loan is here to bail you out. But wait, what is it in the first place? Who is eligible for such a loan? When should one consider taking it? Is it even worth going for in the first place? Well, take a deep breath and read through because we have it all laid bare for you.

The bigger picture

In consolidating student loans, the borrower considers taking a new loan, which is subsequently used to pay the various loans. In the end, you will only have to pay one larger loan instead of several ‘small loans’. It is possible to consolidate most federal student loans and even private student loans. Before rushing for application, you need to know whether you are eligible. In several instances, someone is considered eligible to consolidate his student loans if he;

• has a good credit score or a good history of settling debts
• has at least $5000 to $7500 in loans
• is currently not studying or in school
• has started paying the loans or is still within the payment ‘grace period’

It is worth noting that it might not be possible to consolidate federal and private student loans. Yet again, it is only possible to consolidate the loans one holds in his name. As such, it is not possible to consolidate loans your parents or friends took to finance your education.

When should you consider consolidating your loans?

Well, people do not just rush into taking debt consolidation loans simply because they are eligible. In most cases, it comes as a necessity due to prevailing circumstances. For instance, you might have graduated and you still do not have a steady job to pay the different student loans you owe. This option will come with manageable repayment options. It might also be necessary when your financial circumstances have changed. You have probably lost your job and you are no longer able to make the various monthly repayments. Consolidating your student loans might come in handy in such situations. For someone who is comfortable settling all the various loans individually, it might be advisable to stick to your plan.

Potential benefits of consolidating student loans

For someone who opts to consolidate his student loans, you stand to gain several benefits. These include;

Streamlined payment process

By offsetting individual loans and remaining with one debt to focus on, you will have an easier time organising yourself. You can stop to think of how cumbersome it is to servicedifferent loans at one. At one point, you will have to keep records of the various monthly payment dates. Consolidation of your student loans relieves you of this stress.

Extended payment periods

If you feel constrained by the multiple student loans due to the short repayment periods, a debt consolidation loan can help you extend the repayment period. However, it is worth noting that such an arrangement means that you will pay interest for longer. As such, you will end up paying more.

Reduced Monthly Payments

By considering longer repayment periods for the loans, you will be lowering the monthly payments. You have probably just landed on your first job and you are not able to meet the costs of the other repayment plans. Instead of cracking your head unnecessarily, you can choose a consolidationloan that will ensure manageable monthly payments.

Lower interest rates

For someone with two or more private student loans and better credit scores, you can qualify for a consolidation loan at lower interest rates. This enables you to pay lower amounts. It can’t get any better.

Possible Repayment Plans

While many financial institutions offering debt consolidation services do so under fixed repayment terms, it is possible to benefit from other repayment options. One common option is the graduated repayment method. Under this option, you will start offsetting the loan at lower monthly payments and then gradually increase the monthly payments, normally after two years.

Yet again, there is the income-sensitive repayment option. This option moves in line with your pre-tax monthly incomes. The monthly repayment rates will be considered as a percentage of this amount. This option proves perfect to a graduate who has just secured a job and is currently earning an entry-level salary. Over time, you can anticipate increased salaries and have an easier time settling the remaining part of the loan.

Closely related to this is the income-contingent repayment plan. The monthly amount one pays under this plan depends on the total amount he is earning and the current outstanding debt. The amount changes periodically to reflect new levels of income and outstanding loan amounts. There exist other multiple repayment options. You can get information on this at nationaldebtrelief.comor your trusted choice of debt consolidation partner.

Consider your options

After all is said and done, the final decision lies with you. Before you settle on student loan consolidation, you need to evaluate several options and consider various factors. For one, you need to compare the interests paid on your current loans with the new interest rates of the consolidation loan. You should also consider the issue of pre-payment penalties on the various loans you owe. Certain lenders charge borrowers for settling loans earlier than initially agreed. You also need to stop and think about the new payment periods. Most importantly, be certain of having the financial muscles to offset the new monthly payments.

Living in perpetual debt isn’t something anyone wants to go through, especially if you have just graduated from an institution of higher learning. You deserve a better future. With proper planning, consolidating your student loans can help you achieve that. You just need to know how to go about it!