Tuesday, October 17th, 2006
Loan consolidation is the process of combining multiple outstanding loans into a single new loan, which can be repaid over an extended period of time with a single (usually lower) monthly payment.
Consolidating your student loans can free up money in the short term by lowering your monthly payment and can also save you money in the long term by attaching a lower interest rate to the total loan amount. Consolidation can also save time and frustration by combining all of your loans into one simple monthly payment.
But, like most loans, you must be fully aware of your current situation in order to make a knowledgeable decision about the future. Be sure to know the loan terms that you currently have. Familiarize yourself with your current loan situation before deciding whether or not to consolidate.
In some cases, consolidation can save money in the short term but can also significantly increase the total cost of repaying your loans. If, for example, your consolidation extends the payment terms to 30 years (from 10 or 20), you’ll end up making more payments and paying more in interest in the end. Be aware of this type of scenario.
The above is just one of many possible scenarios and it would be difficult to cover all possibilities here. So, if you’re in need of further information before deciding whether or not to consolidate, Bankrate has a thorough FAQ article that answers a ton of questions about the details of student loan consolidation. Also, you can learn about different types of repayment plans here.
If you decide that student loan consolidation is the right desicion, you can compare some of the student loan consolidation options that are available. Be sure to research completely before making your final decision - it is an important one.
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