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| Student Loan Consolidation |
| Tuesday, September 11, 2007 |
Loan consolidation is the process of taking a new loan to pay off an existing loan. Irrespective of the type of loan, loan consolidation is usually a fantastic way to pay the remaining amount of an existing loan at a lower interest rate or APR. Today student loans are one of the major contributing factors aiding student education the world over. In the United States alone, student loans are one of the most popular ways to pay for tuition and college education fees. Student loan consolidation is a good idea to finish paying a student loan once an individual starts earning, and does not want to pay a high APR that he might have previously agreed to.
The reasons for student loan consolidation can vary but the most popular reasons for student loan consolidation are:
• To get a lower APR by taking a new loan
• Paying the remaining amount on an existing loan in a single bulk payment
• Making outgoing payments simpler, by merging all loans into a single loan.
Let’s take a look at some of the points mentioned above:
It might be possible that at the time of accepting the terms and conditions of the student loan, the student had no option but to accept the high APR, or the student loan might not have a high APR but a newer loan is actually offering a lower APR. In either case student loan consolidation is primarily carried out to save money. However, before going ahead and starting loan consolidation make sure that there is no ‘fine’ or ‘processing’ fee involved for paying the remaining student loan amount in a single payment. Usually loans are flexible and the company does not mind getting all its money back, however sometimes when an individual starts loan consolidation, the company that had given the original loan looses money on the interest, and hence usually do charge a fee to make up for the interest lost.
Before starting student loan consolidation the individual should make sure that the loan consolidation is actually saving money, agreed that the APR might be lower, however the whole exercise is pretty futile if the savings on interest are made up for in processing fees, or an early payment fine. If the individual wishes to pay the remaining student loan amount by making a bulk payment, in that case too it is essential to check the financial implications of student loan consolidation.
Both scenarios require a little bit of research and reading all the paperwork involved is a must; however there is no denying that student loan consolidation almost always saves an individual’s money by reducing the APR payments, and also allows more flexible terms of payment. Usually student loans have a high APR as they are essentially high risk loans (in fact this is the reason why a private student loan usually requires a co-signer). If you are currently paying instalments on a student loan, then you should look towards consolidating the student loan, the chances are that you will end up saving money.
In the rare case that you are actually looking for a loan to make sure you do not default on an existing student loan, loan consolidation is also an option, however you should make sure that you do not become a victim of predatory lending, a company might see your desperation and actually offer you loan consolidation at a high APR and also charge additional processing fees, it is therefore important that you fully understand the implications of the student loan consolidation that you are entering. Another very important thing to remember is that a credit check is run every time you apply for a new loan, so if you are considering loan consolidation, do so only if you are confident of the loan being approved. |
posted by sai.gani123 @ 6:33 AM   |
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