RSSConsolidating Private Student Loans – Things You Need to Know Before You Consolidate
Dec 14
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Consolidating private student loans should be done separate from consolidating federal loans. Why? Simply because consolidating federal loans results to a lower interest rate. But even then, there are other options for you to take when you want to consolidate your private student loans.
Price is not an issue with private student loans. This just tells you that when you consolidate your loans, you are simply paying off all your past loans with a new, single, and larger loan. You might ask what benefit a new and larger loan will give you. Well, the most basic one is the fact that you only have a single monthly payment to worry about.
Aside from this, you can also lower down your monthly payments with the resetting of the term period of your new loan. Nevertheless, your lender can still profit from you through the total interest you pay throughout the loan period. But you can bring this to an equal footing if you learn to negotiate your interest rates. It is a fact that interest rates are dependent on your credit standing; therefore if you have improved your credit score over time, you are certainly eligible for a lower interest rate.
About 50 points of improvement in your credit score is required for you to avail of a lower interest rate. You can consolidate your student loans with another lender for a lower rate or choose to strike a deal with your current lender to reduce the rates on your loans. Your current lender will rather have you pay interest to them than to their competitor, so be sure to ask them first.
Another way you can repay your private education loans is to get a home equity loan. You use the money you get from your home equity loan to pay off all your loans in full. However, this is only applicable if you have a house with equity. When you do this, you are locking in the interest rate instead of having to deal with a variable rate that is very common with student loans.
In consolidating private student loans, don’t forget that you are doing business with a private company. Therefore, it is their rules that you follow. Be prepared to pay the interest rate they set for you as well as the additional fees they may have for processing your loan.
Don’t forget to separate consolidating your federal loans from your private student loans. There are a lot of advantages in consolidating your federal loans and lowered interest rates are just one of them.