Consolidating Your Private Student Loans
If you consolidate your private student loans you can combine all of them into one, and you will find that the single monthly payment is much easier to handle. Taking this step will help you to manage your budget and provide you with a lower interest rate at the same time.
Preparing To Consolidate
Start by listing all of the loans you owe, including the balance, interest rate, and lender—and review the specific terms as well. Note that you may find the interest rates to be similar to one another, and some loan provisions, including prepayment penalties, may make it too costly to refinance that loan in consolidation.
Obtain your credit report and review your credit score, which will be the basis for the interest rate you are charged, and if you detect any errors, take the necessary steps to have them corrected. (If your credit score has increased by 50 points or more since you took out the original loans, the interest rate you are charged will be lower.) Also, if any of your student loans happen to have a variable interest rate, you will definitely benefit from consolidating. The terms of the new loan will be reset, and the amount of time you have to pay off the loan will be extended.
Debt consolidation for people with bad credit is a lot more difficult than it is for individuals with good credit so take care of your credit!
Deciding On A Lender
Do some research and see what various education lenders have to offer you. Beware of prepayment penalties, and avoid variable interest rates as well. Ask about the costs related to the loan, such as an origination fee, and discuss the possibility of rolling them into the loan. You should also consider any incentives these potential lenders have to offer, which may include a reduction in the interest rate if you use your bank’s automatic payment plan. Your other options include getting a home equity loan, dealing with a non-education lender, or taking out a personal loan at your bank. Remember too that one of the original lenders may agree to consolidate your student loans because they don’t want to lose your business. After you have considered all of these factors, you can take the final step and apply for your loan.
If you have poor credit, you may need to find a company that specializes in debt consolidation loans for bad credit.
