Evaluating a Student Loan Consolidation Interest Rate

When you are looking to consolidate your student loans, the process can seem a little bit confusing and student loan consolidation interest rates are no different. Let’s look at an example: sometimes what you think the consolidation companies are going to do is not what they end up doing for you at all. Everyone thinks that consolidating their debt and loans will automatically save them money on the interest, but this is not always the case. What these companies usually do is take all of your loans, and put them together, making your payments lower and the pay period longer.

What they may not tell you up front is that they also take all of your loans’ interest rates, both high and low, and combine them, average them and charge you at a rate that is in between your previous high and lower rates. For example, if you have a student loan with an interest rate of 12%, and another student loan with an interest rate of 6%, the consolidation company will put those loans together, combine the interest rates, and then round UP. This process is great for the higher interest loan, because it brings that rate down, but not so good for the lower interest rate loan, because you end up paying more interest on that one.

How to Find the Best Interest Rates

The Internet is a great tool to compare and contrast different student loan consolidation interest rates. Every company offers different perks and options, and it is a good idea to really do your research before you sign anything, or even fill out an application. Remember, most times, when you consolidate your loans, the pay period increases to up to 30 years or more, so you don’t want to get stuck with something that doesn’t work for you!

There are a few companies that don’t necessarily advertise their interest rates, but don’t skip over them, thinking that the rates must be high – it is always best to know, so give them a phone call. If they don’t answer your question right away, and skirt around the issue, you can then move on to another student loan consolidation company.

How to Evaluate Interest Rates

Once you have found a few good companies that offer low student loan consolidation interest rates, you can then evaluate them, and make your final decision. Now is the time to call or email the companies, and ask them for more details. For instance, make sure you ask about their variable and fixed interest rates, and decide which one you would like to go with. Remember, interest rates always fluctuate, so you may want to stick with a fixed rate that will never change.

Also, do not make any decisions until you find out what they do with loans that have different interest rates. Make sure you get the best deal around: it is possible. Ask questions – don’t be afraid to request more than they are offering. Many people miss out on better deals because they don’t think to ask for them. The worst that will happen to you is hearing the word “no,” and you might receive a “yes!”

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