How to Compare Student Loan Consolidation Terms

When you are looking into student loan consolidation, compare multiple options instead of settling on the first opportunity you receive to consolidate. Not all consolidation offers are equal, and you will find better terms on some than others. You can consolidate only your multiple student loans, or you can opt to consolidate a large portion of your other debt to have only one monthly payment. Ultimately, you should choose the option that will be cheapest for you in the long run.

Consolidating Federal Student Loans

If you have a federal student loan, you may not be eligible to consolidate it through a private company. The federal government offers its own programs for debt restructuring and forgiveness. You should consider these options before speaking with a private company. Federal loans are typically subsidized, and you will likely get a better rate if you are eligible for these subsidies, even on consolidation options. During certain periods of time, such as when the country is in recession, you may be eligible to have a portion of your federal debt completely forgiven. 

Compare Settlement Rate

Consolidation is actually a combination of settlement, refinancing and consolidation in one. Your new lender pays off your existing loans with a new loan. Many consolidation companies will negotiate down the debt you currently owe your various lenders. The lower they force this payment, the lower your new loan will have to be. This will save you a lot of money in the long run. Unfortunately, you cannot usually engage a consolidation lender to negotiate your debt down before you have signed a contract. This means you may not know the exact settlements they can promise you. You can, however, ask for guarantees or average settlement rates from each company to have an idea of which may be best. 

Compare Interest Rate

Unlike settlement rates, you should be able to get an interest rate quote before engaging the lender fully. This rate quote will be the single greatest factor determining the cost of your consolidation loan. It should depend on your interest rate, whether you are using collateral for the loan and other factors. If you have a high income, you will want to supply this information to your lender in order to show them you are not a risky borrower. Anything you can do to assure them you will make your loan payments will help drive down the cost of your new loan.

Compare Payment Options

Student loans are unique because they offer many different structures for their repayment. When you are taking a student loan consolidation loan, you can still use these options for your new loan. For example, some options are income-contingent, meaning you pay a portion of your income to repay the loan each year. Other loans are graduated, this means they are less expensive in the beginning, and then monthly payments go up as you advance more in your career. Since you are just leaving school, these options provide you with the ability to build your career before you take on huge payments.



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