Ways & How

How to Consolidate Student Loans

How to Consolidate Student Loans

Students always look forward to their graduation day, the day when all their hard work will finally pay off. But if you are a college student with huge student loans, your happiness might be cut short because in a few months’ time, you will be asked to start paying your student debts. One of the debt management options that you have is consolidation, which combines all your small student loans into one bigger loan coming from one lender. The lender will be the one responsible for paying off the balances on your smaller loans. If you are considering consolidation, here are the steps on how to consolidate student loans:

  1. Understand student loan consolidation. While student loan consolidation can be a wonderful thing for people whose financial status is far from satisfactory, this is not for everyone. It is only advisable for people who are able to negotiate lower interest rates for their student loans. Otherwise, debt consolidation could end up with you making higher payments than your usual debts, putting you in deeper financial trouble.



    You should also understand that debt consolidation not only lowers your interest rate but also lengthens your repayment schedule and may damage your credit scores if not managed properly.

  2. Get a copy of your credit report. Your chances for being approved for loan consolidation depend on your credit score. Make sure that your score is accurate. If you have a good credit rating, chances are you might be able to consolidate your student loans to a lower rate. Otherwise, you may want to seek out other options to pay off your student debts.

  3. Contact several lending institutions. There are two types of debt consolidation—secured and unsecured. Secured loans are backed up by collateral, such as cars and houses, while unsecured loans do not have any collateral and are also known as personal loans. Secured loans give you a lower interest rate, but they are also riskier on your part because missing a payment may mean foreclosure of your house. You should contact your chosen bank to know which method is best for you. Your lending institution will also explain to you if you are eligible for debt consolidation and what your interest rate would be. You should make sure that the interest rate offered to you is lower than your current interest rate. It is best to shop around for different lenders to find the best deal for your current situation.

  4. Read the contract carefully before finalizing the loan. Remember that you are dealing with a huge amount of money in student debt consolidation, so you should make sure that you understand every word in your contract. Hire an attorney, if needed, and do not hesitate to ask questions. Make sure that the quote given to you reflects on your contract. If it does not, find out why. Complete the application process once you have studied the contract.

  5. Pay off your debts quickly. One of the good things about student loan consolidation is that it allows you to make smaller monthly payments. However, this also means that you will be paying your student loans for a longer period of time, which is not a good thing since your interest will start to pile up. The best thing to do here is to set a higher monthly payment. Look at your budget and decide how much you can afford to pay every month above the minimum monthly payment. By controlling your spending and channeling your money towards paying off your student loans, you will get out of debt faster.

Knowing how to consolidate student loans will open up another opportunity for you to pay off your student debts. Carefully study all the options that you have in paying off your loans so that you can figure out if student loan consolidation is right for you.

POST YOUR COMMENTS

Your email address will not be published. Required fields are marked *



WaysAndHow is an online community of brilliant "how to" article authors who are wholly dedicated in bringing you the best and most in-depth ...

Follow us tweets

  • Knowing how to apply for Medicaid online is probably the best and most convenient ...

  • Student loan is one of the most difficult debts to pay off, largely because you accrue most ...

  • Most people would say that one of the hardest parts in starting a business is getting new ...

whats new

Contact Us

Contact

Address: Triple E Holdings Ltd. P.O. Box 23475 Richfield, MN 55423-0475 USA