Debt Consolidation Loans – All You Need to Know About Student Loan Consolidation

Are your federal education loans bogging you down? Are you looking for a manageable way to repay these debts? Have you tried debt consolidation? You should! Student loan consolidation provides a means for you to cut down your education debts and lead a manageable life.

Even though it extends the loan’s lending time, a debt consolidation loan reduces your monthly payments creating an easier means of student loan repayment. In essence, consolidating student loans is a means of refinancing the loan. Since you may not have enough money to pay for your living expenses and to repay other debts, student loan consolidation will make it possible for you to repay the loans even when you have little disposable income.

Who qualifies for student consolidation loans?

As you know, there are private and federal education loans. Holders of these types of loans are eligible for debt consolidation though the cases are handled differently.

The difference between these two loans is that the federal education loans offer the easiest and the most beneficial consolidation processes. They often have increased payback terms lowering monthly repayment costs. If you have more than one of this, then you may consider getting the loans consolidated.

On the other hand, private education loans are granted and therefore managed by your regular lending financial institutions like banks, state agencies, and college foundations. As a result, they attract higher interest rates which can be variable or fixed. These loans are credit based. This means that your credit score is factored in. Good credit scores equal lower interest rates and vice versa. Low credit score holders are considered a high credit risk.

In line with these differences, you should never consolidate private and federal education loans together.

How to consolidate federal education loans

  1. Get a professional evaluation

The first and most important thing to do is to get your finances evaluated by a professional. Have a sit down with a trusted financial professional and give them details of your whole financial situation.

Your consolidation options and the amount of money you will qualify for is determined by the amount owed and your overall difficulty in fulfilling your current monthly obligations.

This is an important step even when you don’t feel the financial pressure from the student loan. A consolidation plan is a sure path to freeing up more cash through a structured payback system.

  1. Weigh your options

Your options depend on the payment plan you wish to take up. The payment plan can be contingent on your income. In other cases, you have the option of choosing a payment plan that stretches a long time but has the lowest and most affordable repayment costs. These options will be laid out for you by your chosen counsellor or debt consolidation consultant and you’ll have to pick the one that suits you best.

For this process to be fully implemented, you should have your student loan details. These include the login information and the account’s PIN. With this, your consultant will have a clear view of your current situation and how to move forward.

  1. Submit the application

If you agree with debt consolidation after consulting with your financial consultant, you may submit your application for a student debt consolidation loan. The federal debt consolidation application is detailed and once you put in all the details, your application will be processed.

Note that the application will be rejected if you enter incorrect account details or if you omit any information. Thanks to information technology efficiencies, you can send your application online and you’ll receive feedback within a short time.

  1. Loan payment

Once your loan application is approved, your current federal loans will be paid off within 90 days. This is made possible by the fact that the debt consolidation company will have contacted the federal loans department. Approval of your application means that both parties have agreed that debt consolidation is a good solution for you.

  1. Make repayments

Approval of the debt consolidation plan means that your chance to pay the loan at lower and forgiving rates lies with you. If the previous federal education loan repayment plan put pressure on your bank account, consolidation will have lifted off some of the pressure. Monthly repayments should be easy and affordable. Your life should also get better since you can save a little more.

Paying off your consolidated federal education loan in time provides a means of strengthening your credit score. In case you aren’t aware, your credit score is determined by how you repay your loans and other forms of debt. Repaying your federal loan in time at all times means that you have the chance to strengthen your credit score if it is on the brink of putting you in the ‘high-credit risk’ region.

  1. Spend wisely

Once you have lower monthly repayment for your consolidated student loans, you may find yourself with a little extra to spend. Even though debt consolidation loans get the pressure off your back, you should use this as an opportunity to save more and make better investment plans.

Create a reasonable budget and stick to it. Ask for a raise, find a new job, or get a second job, and cut down on credit card debt. Shop with cash always and save a percentage of every income earned.

Consolidating private education loans

You cannot get direct consolidation for your private student loans. To consolidate these loans, you should find a private lender to work with. They have variable eligibility criteria and requirements and you must shop around before making a decision.

A challenge with private loans is the borrowing restrictions that require minimum loan borrowing. Your credit worthiness will be evaluated and this can limit the amount of loan extended to you immensely. Some lenders are also known to charge origination fees and this fee isn’t available for individuals with federal student loans as they qualify for direct consolidation loans.

In conclusion, student loan consolidation reduces your financial burden resulting from debt. Whether you have private or federal student loans, ensure that the payment plan is affordable. Shop around to get the best student debt consolidation plans.