Student loan consolidation is an often overlooked option that can drastically simplify the educational loan repayment process. The purpose of consolidation is to reorganize many debts into a single payment from a single creditor. Oftentimes one can even reduce the monthly payment amount, to make school loan repayment more manageable. Before you decide, here are some factors you should consider.
Maybe you’re on the right path but find you’re weighed down with sizable student loan payments every month. You might be able to consolidate and reduce those monthly payments and free up time and flexibility. Or perhaps, paying more every month is the way to go. That way you can repay your school loans sooner. Having a goal that coincides with your goals and your lifestyle can help you determine if consolidation is right for you.
Your Payoff Amounts
You will need the basic information of your original loan accounts, including the lending institution’s name, account number and the current payoff amounts for each loan. From this information, you need to have this information prior to consolidating any loans. A student loan calculator can help you determine if a consolidation program will be effective for you.
Your Credit Score
Like everything else in the world of finance, the interest rate you’re offered is contingent upon your credit score. Ideally, you want a credit score above 700 to get the best interest rates. If you give yourself enough lead time to check all three of your credit reports and take the initiative to have errors or inaccuracies corrected, you stand a greater chance of locking down lower interest rates when you consolidate.
Fees, Terms and Conditions, Flexibility
While you may be able to lower your monthly payment once you consolidate your school loans, you may still end up paying more overall, due to the extra fees you may incur for the privilege of reorganizing your finances. Check the terms and conditions of any agreement you’re considering before you commit. Within these terms, you may also be able to negotiate a more flexible payback plan if you are unsure of your income after graduation.
Is a Cosigner Needed?
Perhaps your credit isn’t great and you don’t have time to improve your credit score. In such a circumstance as this, a cosigner may be an option to consider. When a person cosigns for you on a particular loan, they agree to take legal responsibility to pay that debt in the event that you should default on it. In short, your cosigner is on the hook if you do not pay, so be sure your repayment plan is one you can stick to.
Despite the hoops you may have to jump through in order to consolidate school loans, the process should make it easier to manage your finances and work within your budget. So do your research and make sure that you’re getting a repayment plan what works for you.