The Advantages of Student Loan Consolidation

Student loan consolidation is an excellent choice if you have numerous loans from different agencies and with various interest rates. Having several debts can complicate your installment payment plans. By bringing your smaller loans together in one big loan, you can make things more manageable. Here are the main advantages of consolidating student loans.

Lower Monthly Repayments

If you consolidate your student loans, your monthly payments will be significantly lower than when you pay your loans individually. The monthly installments will depend on your new lender or revised consolidation agreement, but it is not unusual for debtors to get anywhere from a 30 to 50 percent reduction in total monthly loan payments.

Lower Interest Rates

When you pay for a loan, the monthly installment that you remit to your loan agency is the total of a payment towards the principal plus the interest fee. Loan agencies that offer loan consolidation are willing to reduce not only the total monthly payment towards the principal but also the total interest rate. The new interest rate for the consolidated loan will be determined using a weighted average of the different rates of your multiple student loans. Many loan companies will use this weighted interest rate as the fixed rate for the entire loan term. The best part is that the maximum interest rate that can be charged by loan companies for consolidated student loans is, as of January 2010, pegged at 8.25 percent.

Flexible Terms of Student Loan Consolidation

Individual student loans can have very steep terms. In addition to having rising or ballooning monthly payments towards the end of the loan terms, individual loans can have relatively short terms. With consolidated student loans, however, borrowers can expect to have an extended term that can last up to even 30 years. This means that the entire loan amount will be spread over a longer period, which can again help reduce the total monthly loan payment.

A More Convenient Payment Arrangement

Consolidating your student loans will make your monthly payment a lot simpler. Instead of dealing with several loan companies and setting aside different amounts every month to pay for each loan, you will need to communicate with only one loan agency and will have one fixed amount to pay every month. By having only one company to deal with, you can save not just money but time as well.

Overall, a student loan consolidation will make your monthly payments a lot easier to bear. If you have more elbow room to adjust your finances, you have a better chance of paying off all your student debts and keeping your credit score strong. 

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