Student Loans

Private Student Loans – Considerations For Consolidation

If you have outstanding private as well as federal student loans, to take advantages that each has to offer, when you consider consolidation you should do them separately. Federal loans usually have lower interest rates, so consolidating them is another sort of ball game.

Consider That They Are Rolled Into One

The amount of your consolidation loan is not a big issue, it simply reflects the amount you need to pay off all of your private student loans. This is a figure you have probably had in the back of your mind anyway. It is what the cost will be so you will have a new single payment. But, understand, that the single loan will probably require far less for each monthly payment than you are making for the sum of two or more other loans that you may be presently carrying.

Consider The Benefits

What you are basically doing is having one payment, to one lender, on one day of the month, at one interest rate, at one payoff date. Having different payment amounts, to different lenders, due on different days of the month, at different interest rates, with different pay off dates, well, you will save money on postage and envelopes alone.

Consider Your Weighted Interest Rate

Speaking of interest rates, if you have been paying your various loans regularly, you should be able to get an interest lower than that of your various loans. If you have improved your credit rating by just 50 points, you should be eligible for more competitive rates. Online you can find weighted interest rates calculators that will give you an average of the interest rate among loans you are presently carrying. This will help you negotiate a reasonable interest when you go for your private student loan consolidation.

Consider Your Current Lenders

Although it is prudent to shop around for the best rates on consolidating your private student loans, you may want to speak to one of your loan holders you are presently paying. They may be more than willing to work with you. Nevertheless, be armed with quotes from other lenders so you have some ammunition when you negotiate the consolidation. Actually, no matter who you negotiate with, it is good to have quotes from others.

Consider a Home Equity Student Loan Payoff

Another way to pay off all your outstanding private student loans would be getting a home equity loan. If you have considerably equity in your home, you could borrow against that equity to pay off any standing student loan amounts. One good thing about this approach is that you can usually lock in an interest rate rather than having to deal with a variable interest rate that is somewhat common in the student loan consolidation market.

Consider the Future

Just because a lender may agree to consolidate you student loans, do not let them think that they are doing you a favor. It is the other way around. You are doing them a favor by giving them your business. Before you sign anything, make sure the terms, rates, and conditions are comfortable. Once you get your private student loans cornered and manageable, you will want to start thinking of ways to reduce the burden of any federal student loans you may be struggling with.

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