How to Get the Best Student Loan Consolidation Rates

Student loan consolidation rates are the interest rates that you would have to pay on your consolidated student loans. Consolidated student loans are loans that are created when you merge your student loans into a single loan. This simplifies your loan repayment process, since now, you won't have to keep track of all the different terms, monthly payments and interest rates. Loan consolidation also gives you a chance to get more affordable interest rates. There are a few things you can do to make that happen, but you must be careful - otherwise, you may wind up with bigger interest rates than before.

Understanding Student Loan Consolidation

You are allowed to consolidate your student loans at any point between your graduation and the end of the student loan repayment period. You can consolidate both your federal student loans and your private student loans - however, federal student loans and private student loans must be consolidated separately. With federal student loans, you can either consolidate through the Department of Education or through a private lender. Private student loans can only be consolidated through private lenders

Choose a Consolidation Loan With Fixed Interest Rate

When trying to get the best student loan consolidation rates, you must first check what kind of interest rates they are. There are two types of interest rates - fixed and variable. Fixed interest rates remain constant until the loan is repaid, while variable interest rates change every year depending on the market conditions. There are times when variable interest rates are lower than most fixed interest rates, but you should keep in mind that they won't stay this low for the entire repayment period. Furthermore, fixed interest rates are better for your budget. When you are making your monthly budget, you will know how big the interest rates will be and you will be able to set the necessary funds aside ahead of time.

Apply for Consolidation Before July

While fixed interest rates won't change once you consolidate your student loans, you will get different fixed interest rates on the same consolidated loan before and after July of each year. That's because this is when lenders adjust their starting interest rates. It is hard to tell ahead of time if the starting interest rates will go up or down, so your best bet will be to apply before July.

Apply During the Grace Period

This goes hand-in-hand with above. If you just graduated and you considering consolidating your student loans, your best bet is to consolidate them before the grace period ends. That is because, under the law, the private lenders must give you a 0.06% discount on your starting interest rates if you apply prior to the end of the grace period.

Check Your Existing Interest Rates

If you are consolidating federal loans, the starting interest rates will be determined by taking the weighted average of the student loans that you are consolidating and rounding it off to the nearest 1/8th of a percent. If your student loans have similar interest rates, the consolidation won't reduce your interest payments by all that much. But if you consolidate student loans with significantly different interest rates, the overall savings will increase dramatically.

Check the Lender's Track Record

Finally, it is important to remember that just because lenders promise low interest rates doesn't mean those are the rates you will get. The lending industry is full of scammers who will lie to you and make promises that they can't deliver upon. You can save yourself a lot of hassle by checking potential lenders with Better Business Bureau. You should also make sure to read all the paperwork before you sign it. If the interest rates you were promised are not set in writing, the lender has no obligation to honor them.


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