Student Loan Consolidation - Frequently Asked Questions
You might have heard of student loan consolidation already and have wondered what it is actually about.
There may still be a lot of questions in your head but as you read on, hopefully, you will grasp the basic information about student loan as commonly asked questions are being provided with answers.
Question 1.
What is student loan consolidation? Student loan consolidation, also known as private student loan, is the primarily merging of all your outstanding loans into one single loan.
This has a fixed interest rate, usually much cheaper that the overall interest that you are paying, and is handled by a single lender.
Question 2.
What makes student loan consolidation different? Student loan consolidation is unique in the sense that it has certain benefits that only comes with student loans.
For instance, the interest rate for consolidating your loan might be tax deductible.
There is no greatest possible amount available, and you have a repayment term you can potentially defer or postpone temporarily.
And if ever a borrower dies, debt is fully discharged.
Question 3.
Why might I consolidate? The main reason to consider consolidating are the following: o rolls all your student loans payments into one monthly bill o locks in on a fixed, usually lower, interest rate for the term of your loan, potentially saving you thousands of dollars (depending on the original, overall interest rates of your previous loans) o potentially flexible repayment options during hard times with no fees, charges or prepayment penalties You should consider consolidating your loans if it has a lower interest rate, without a question, compared to the ones you are currently paying, most especially if you are having a hard time coping up with your monthly payments.
On the other hand, if you are close enough to paying off your existing loans, then consolidation is not worth it.
Question 4.
What are some pitfalls for consolidating your student loan? Because you can actually extend your repayment term, you can make smaller payments in each month.
but keep in mind that with each passing months, the interest rates are also building up.
It might seem that you save each month by paying less, but you still lose a lot of money to the interest.
On the other hand, since student loan consolidation has no penalties for paying off your debts early, then you can make larger than required payments once your income increases.
Question 5.
Should I consolidate if all my loans are in one location? You don't have to but if you want to, you can.
The lender will simply repackage your loans so that they will have the above mentioned characteristics.
If you only have one lending company, this may limit your options on who to consolidate with.
If you are still a student and you need to have another loan, try getting loans from other lenders so you will have more choice when you graduate.
Question 6.
How do I know my interest rate? Some statements will show you the rate of the loan so try checking on them.
If it's not there, you can always call your lender and ask.
Be sure to have all the rates if you still have multiple loans.
The interest rate for a consolidated loan is based on the overall interest rate of your existing loans.
Question 7.
Can my spouse and I consolidate our loans together? Yes you can, but it might be a bad idea.
For one, if you want a deferment, both of you should meet the criteria.
If one of you dies earlier, then the other is obliged to pay off the deceased's debts.
If later on you separate or divorce, you will still have to pay the loans off together.
Question 8.
When should I consolidate my loans? It is best to consolidate your loans during the sixth-month grace period.
By then you will get a lower interest rate.
However, it is wise to consolidate your loan on the fifth month of your grace period so you will not lose the rest of the grace period.
Question 9.
Where can I get a consolidation loan? If you are satisfied with your current lender, then you can consolidate with them.
If it's a bank, call them up and ask what they can do for you.
There may still be a lot of questions in your head but as you read on, hopefully, you will grasp the basic information about student loan as commonly asked questions are being provided with answers.
Question 1.
What is student loan consolidation? Student loan consolidation, also known as private student loan, is the primarily merging of all your outstanding loans into one single loan.
This has a fixed interest rate, usually much cheaper that the overall interest that you are paying, and is handled by a single lender.
Question 2.
What makes student loan consolidation different? Student loan consolidation is unique in the sense that it has certain benefits that only comes with student loans.
For instance, the interest rate for consolidating your loan might be tax deductible.
There is no greatest possible amount available, and you have a repayment term you can potentially defer or postpone temporarily.
And if ever a borrower dies, debt is fully discharged.
Question 3.
Why might I consolidate? The main reason to consider consolidating are the following: o rolls all your student loans payments into one monthly bill o locks in on a fixed, usually lower, interest rate for the term of your loan, potentially saving you thousands of dollars (depending on the original, overall interest rates of your previous loans) o potentially flexible repayment options during hard times with no fees, charges or prepayment penalties You should consider consolidating your loans if it has a lower interest rate, without a question, compared to the ones you are currently paying, most especially if you are having a hard time coping up with your monthly payments.
On the other hand, if you are close enough to paying off your existing loans, then consolidation is not worth it.
Question 4.
What are some pitfalls for consolidating your student loan? Because you can actually extend your repayment term, you can make smaller payments in each month.
but keep in mind that with each passing months, the interest rates are also building up.
It might seem that you save each month by paying less, but you still lose a lot of money to the interest.
On the other hand, since student loan consolidation has no penalties for paying off your debts early, then you can make larger than required payments once your income increases.
Question 5.
Should I consolidate if all my loans are in one location? You don't have to but if you want to, you can.
The lender will simply repackage your loans so that they will have the above mentioned characteristics.
If you only have one lending company, this may limit your options on who to consolidate with.
If you are still a student and you need to have another loan, try getting loans from other lenders so you will have more choice when you graduate.
Question 6.
How do I know my interest rate? Some statements will show you the rate of the loan so try checking on them.
If it's not there, you can always call your lender and ask.
Be sure to have all the rates if you still have multiple loans.
The interest rate for a consolidated loan is based on the overall interest rate of your existing loans.
Question 7.
Can my spouse and I consolidate our loans together? Yes you can, but it might be a bad idea.
For one, if you want a deferment, both of you should meet the criteria.
If one of you dies earlier, then the other is obliged to pay off the deceased's debts.
If later on you separate or divorce, you will still have to pay the loans off together.
Question 8.
When should I consolidate my loans? It is best to consolidate your loans during the sixth-month grace period.
By then you will get a lower interest rate.
However, it is wise to consolidate your loan on the fifth month of your grace period so you will not lose the rest of the grace period.
Question 9.
Where can I get a consolidation loan? If you are satisfied with your current lender, then you can consolidate with them.
If it's a bank, call them up and ask what they can do for you.
