Consolidation of student loans simply means combining multiple educational loans into a single loan. One deduction will be made from your income to cater for all the loans.The resulting interest rate after the consolidation of your student loans is the average of all the rates you used to pay before. This is not a money saving plan since the rate more or less remains the same.
You can get consolidate student debt information, if your income reduces, the contributions you make monthly are lowered and hence the extension of loan time which results in more interest. Therefore, student loan consolidation is essential to help you keep those payments straight.
But even though consolidation streamlines your payment of student loans it comes with other merits and demerits. Just like any financial decision you make it is important to look into a number of issues before you consolidate your student loans.
Most loans by the government offer additional alternative plans for repayment, but in consolidation you get a variety of options based on your income and other factors.
Manageable when you consolidate
There are manageable loan repayment plans with consolidation. After consolidation, your loan time may be increased and hence lowering the amount of money you will have to pay per month. Time can be elongated from the almost standard 10 years to 15 to 30 years depending on your income. This leaves you with enough money every month for other things as you comfortably repay your student loans.
Lower interest rates
Sometimes your new interest rate may be lower than before. This is because while coming up with a fixed rate the lender considers variable rates in your current loans rounded off to the nearestv1/8 %.
Your consolidated student loans are on fixed interest rates. This means you will not be bombarded every July 1st with new loan interest rates. This means you have a predictable payment to make to the end.
These are the benefits you will expect if you opt for consolidation of your student loans. But there are disadvantages you must also look into while making that important decision. One important issue that must be looked into is that you might pay more in the long run. This is true especially if you decide to extend your payment period that can unite thousands of dollars as interest. Also, if you consolidate when interest rates are going low in the market you will be locked in a fixed interest rate plan.…