Are you feeling burdened with student loans? Consolidating
your loans might help you turn over a new leaf.
Student loan consolidation can simplify your monthly
payments and potentially reduce your interest rate, resulting in a lot of
savings in the long term. At the same time, loan consolidation isn't for
everyone, so you need to make sure you understand all the terms before taking
on a new contract.
This guide will go over the ins and outs of student loan consolidation so you know what it means, how to do it, and whether or not consolidating your student loans will give you a fresh financial start. First, what exactly is student loan consolidation?
What Is Student Loan Consolidation?
Student loan consolidation, a way to refinance student
loans, bundles all of your student loans together and combines them into one
new loan with a single monthly payment and a new interest rate. Ideally,
that interest rate is lower than the ones you're currently paying.
Loan consolidation programs might also offer you
more flexible terms to pay off your loans, whether that means buying
more time or getting your loans paid off as fast as possible. Either the
government or a private lender, like a loan consolidation company or bank,
takes some or all of your various loans and distributes a new single loan.
Depending on which entity you use to consolidate your loan, you can consolidate federal loans, private loans, or both. Read on to learn about which loans you can consolidate.
How to Apply for Student Loan Consolidation From a
Private Lender
You can submit a preliminary application for student loan
consolidation online. The private companies and banks all have their own online
application, or you can fill one out and look at offers through
Credible. The applications all ask for your personal information and details
about your loans. Some might ask for your social security to do a soft credit
check, which shouldn't impact your credit score.
You'll find out whether or not you've been pre-approved
immediately after submitting your application. If you want to move
forward, then you'll provide additional information.
To give you an example of the process, I've included
screenshots from the loan consolidation application from the student
loan company, College Ave. Here's the first part of the College Ave
application.
After filling out your personal information and
salary, you'll move onto the second page to review the general terms
of a College Ave contract.
After you review these details, you'll indicate whether
or not you're applying with a co-signer. Having a co-signer with
strong credit can potentially get you a lower interest rate. If you have strong
credit yourself, then you probably don't need one.
The last page of the process tells you whether or
not you've been approved for a consolidation loan. If you have, you'll
move onto next steps, which including choosing a specific loan and repayment
plan.
If you're interested in private loan consolidation, you
should take some time to explore your options. Apply to
several private lenders at once and compare their offers. If you decide to move
forward, then you'll know that you're getting the best one.
By the way, some banks, like Citizens Bank, will give you a
0.24% discount on your interest rate if you set up automatic payments, plus an
additional 0.24% if you open a bank account with them. Based on your loan
amount and repayment plans, these discounts could save you a good deal
of money in the long run.
After you apply, you'll wait somewhere between a few
weeks to a month or two for your consolidated loan. As with any
consolidation application, you should continue paying off all of your loans in
the meantime.
In closing, let's review the key points you need to know if you're interested in consolidating your student loans through the federal government or a private lender.
How to Consolidate Your Student Loans: Key Points
Consolidating your federal and/or private student loans
might save you a lot of money. It can streamline your plan into a
single monthly payment and save you thousands of dollars on interest
over the life of your loan.
The federal consolidation program can open up for more
flexible repayment plans, plus it makes you eligible for an additional
forgiveness program. Private lenders will consolidate both federal and private
loans, and they may offer you better interest rates and lower monthly
payments that save you money in the long run.
Make sure you consider all of pros and cons of loan
consolidation carefully, and read any and all fine print before
signing onto a new loan agreement. If you've done your research and feel
confident that you understand the new contract, then you may very well be able
to simplify your loan payments, reduce the burden of student loans, and
ultimately, save money on your student loans.