How do you consolidate your student loans? Lots of student have been asking how to consolidate their student loan and pay them off for good. Well the answer to the question is all in this article, read carefuuly nd understand the processes.
A student loan is a specific kind of loan intended to assist students in covering the costs of post-secondary education and related expenses, including tuition, books, and living costs. In comparison to other loan kinds, it could have a much cheaper interest rate and a deferred repayment plan while the borrower is still enrolled in school. In many nations, there are also differences in the stringent rules governing bankruptcy and renegotiation. This article identifies the variations in the student loan systems of different developed nations.
Your financial management may seem a juggling act at times. It can seem inevitable that you will make a mistake when you have several loans from different lenders, each with a different interest rate and payment due date. Your ability to handle your debt more effectively will enable you to move closer to paying it off. You could even be able to cut your interest rate or your monthly payment in some circumstances. Sounds good to you? Good. You may find the solutions to your queries about consolidation right here.
Benefits of consolidating student loans:
- Consolidating your loans can help you better manage your loans by combining them into a single loan to pay each month. You may be able to extend the duration of your loan and/or lower your interest rate which can reduce your monthly payment.
- A Direct Consolidation Loan allows you to combine federal loans and gives you the option to repay it over a longer period of time, which lowers monthly payments.
- A private consolidation or refinance loan is a loan from a financial institution like a bank or credit union that typically allows you to combine federal and private loans into one. It may be able to offer you a lower rate than you’re currently paying.
What is a student loan consolidation?
A consolidation loan is essentially a technique to combine several loans into a single, new loan. Your previous loans are paid off by the new ones, leaving you with only one loan that has a single monthly payment for the whole amount of your outstanding debt. The specifics of consolidating student loans depend on the kind of loans you have (federal, private, or a combination of both), as well as the sort of consolidation loan you obtain (again, federal or private).
What’s the difference between federal and private student loan consolidation?
If you have multiple federal student loans, you can apply for a Direct Consolidation Loan, which is a program that allows you to combine these loans into one. The interest rate on this new loan will be a weighted average of the old loans, and you’ll have the option to repay your loan for a longer period of time (up to 30 years), which will lower your monthly payments.
There are some downsides, however. When you extend your loan repayment, you end up paying more in interest over time. Any outstanding interest on your existing loans will get capitalized, which means that it’ll get added to the principal, or original amount of the loan. In other words, future interest charged on your new loan will be based on a higher principal amount. Additionally, you may lose some benefits to your existing loans, such as progress towards student loan forgiveness.
A private consolidation or refinance loan is a loan from a financial institution like a bank or credit union, and it typically allows you to combine federal and private loans into one. Unlike the Direct Consolidation Loan, a private consolidation or refinance loan may be able to offer you a lower rate than you’re currently paying—which would lower your monthly payment. It is important to note that if you consolidate federal loans into a private consolidation loan, you’ll lose benefits associated with those loans.
How do I actually consolidate my student loans?
You can apply for a Direct Consolidation Loan online at studentaid.gov. It’ll take about 30 minutes, and you’ll need your FSA ID, some personal information, and financial information (much of which you can find by logging in to your federal education loan account).
For a private consolidation or refinancing loan, you’ll have to choose a lender and then follow that organization’s instructions. A Discover Private Consolidation Loan application takes about 15 minutes, and you can do it online or over the phone. You’ll be asked to choose the type of interest rate you want (variable or fixed), verify the loans you want to consolidate, and then sign and accept your loans (all online). Get started and apply for a Discover Private Consolidation Loan today.
So I consolidated my loan. What now?
The repayment process may be simpler to handle now that there is only one payment required each month (and possibly a lower monthly minimum). Create a rough budget for yourself that incorporates your new monthly in order to keep track of your finances. If at all possible, increase this amount in your budget and pay off more than the required amount each month. You can also pay extra on your loan when you have extra funds available, such as when you receive a tax refund. In either case, a life without outstanding student loan debt is in sight.