To consolidate your federal student loans, login to your account, choose the loans you wish to combine. You will then pick a repayment plan that is best for you. The interest rate does not really get lowered, but the payments probably will be. You will now have only one loan to manage.
For private student loans, contact your lender. What it amounts to is a refinancing of the loans as one. They can put all of your student loans into a new one. Again, interest may or may not be lower, but the payment should be.
Keep in mind that in both of the above scenarios, you will probably have extended the loan repayment period. Not always a good thing.
You might wish to get a private loan to pay off all your debts, student loans included.
If you are struggling with making the payments on multiple loans, you may want to consider managing your debt by consolidating your loans. Loan consolidation can be a great debt management tool that can lower your total interest rate paid, require one affordable monthly payment and stop collections against you.
If you have multiple student loans and credit card debt, you can consolidate them into one singular loan. You can also consolidate multiple federal student loans through a program with the federal government. Some private lending institutes also offer loan consolidation for private student loans.
Although FFELP lending institutes no longer offer debt consolidation, you still can consolidate your student loans through the United States Department of Education. The Department of Education has a Federal Direct Loan Consolidation program and even if your college does not participate in the Direct Loan program, you can still qualify.What is a Debt Consolidation Loan?
A debt consolidation loan is a loan big enough to cover multiple debts such as medical bills, credit card debt, student loans or a combination of debt. Once you are approved for a debt consolidation loan the money can be used to pay off all the consolidated debt and you are left with one manageable monthly payment at a lower interest rate. Debt consolidation loans are typically offered as secured personal loans using collateral such as a home or other real estate or unsecured personal loan if your credit is in good standing.
Are Interest Rates Really Lower?
Interest rates vary greatly depending on which lending organization funded the loans, the type of debt and the standing of your credit score. The interest rate on a consolidated loan is weighted based on the average interest rate of all loans being consolidated. Overall, you will be paying less interest on one consolidated loan versus multiple loans.
When Is a Good Time to Consolidate Debt?
You may want to consider securing a debt consolidation loan if you are struggling to meet multiple monthly bill payments, want to replace multiple monthly payments with one payment, cannot stay current on multiple bills or you do not want to deal with several creditors or debt collectors.
What are the Benefits of Loan Consolidation?
There are many advantageous reasons for consolidating your debt including paying off old debt which will help improve your credit score and stop any collections against you if the debt is approved for the loan. You can pay off most of your unsecured debt such as medical bills, payday loans, student loans, personal loans and credit card debt. You are then left to make one affordable monthly payment. Another benefit of debt consolidation is the reduction of stress. It can be trying to have multiple creditors calling you every time you go to sit down for dinner. You can end all these calls, pay off old debt and be able to eat your dinner in peace.
Are Consolidation Long-term or Short-term Loans?
Most unsecured personal debt consolidation loans can be obtained as a long-term loan. This reduces your monthly payment into one that you can comfortably afford. Between the lower interest rate and the longer repayment term, your monthly payment will be significantly lower than the total amount you owed each month with multiple bills.
Which Consolidation Loan is the Right Choice?
There are three basic tips when trying to find the right loan for your debt. The first one is to shop around, visit multiple banks or visit several different loan consolidation organizations online and compare the features of each one. Second, be on the lookout for hidden charges and fees, or low introductory interest rates that increase after the introductory period expires. Hidden charges and fees can quickly eat away at any money saved by consolidating your loan in the first place. Third, read all lines in the contract and know exactly what you are getting and the repayment terms of your loan. Add up all fees, charges and interest rates from each consolidated loan you are interested in, if you know someone who is better adept at financial matters, do not be afraid to ask for advice.
How to Qualify for a Consolidated Loan?
Most unsecured consolidation loans require a fairly good credit score, typically 650 or higher and appreciable income in order to prove you can meet the repayment terms. There are some consolidation loans for those with poor or insufficient credit, but the interest rates will be higher.