Breaking Down the Elements of Student Loan Consolidation

Being troubled by a number of loans that require immediate repayment? If yes, then maybe it is about time that you look into simplifying your finances and start placing all of your loans under the care of a single lender. Merging all of your loans under a private student loan consolidation plan simply means eliminating the burden of having to keep track of different payment dates, interest fees and monthly dues.

Aside from the federal government, a number of private lenders also offer loan consolidation as part of their financial services, which specifically target new graduates entering the professional world who are starting to pay off their student loans. Though attractive as it may seem, financial experts still stress the importance of conducting a thorough evaluation of your current finances, as well as assessing the important factors involved in combining all of your loans before jumping on board.

Interest Rates

As with any other kinds of loans, one of the first items you need to focus on will be the interest rates, as these have a significant effect when it comes to repaying your loan. In loan consolidation, one of the most important aspects you need to determine is whether you are getting it from the federal government or a private lender. In the general scheme of things, federal loans offer a superior package due to their interest rates ranging from 2 to 3.5 percent. However, not everyone can make use of this option of consolidation. Experts advise looking into both avenues and identifying which type works best for your needs.

Credit History

Building an excellent credit score can also help you acquire a much more lower interest rate for your consolidated loan. Your individual credit rating is carefully factored in on your loan so it is best to wait til you have an impressive record before getting your loans consolidated. Though some federal loans such as the Stafford loan look past the credit rating and determines your viability based on your needs and capacity to repay your loan, having a good credit score will never hurt your credit and repayment options.

Originating Fee

In combining all of your loans under a consolidated program, another item factor in is your originating fee and the accompanying charges on your loan. Private companies are often more adaptable to giving reduced closing fees to earn your business from their competition.

Grace Period and Penalties

Another element of your loan that should be carefully considered the given grace period for late payments as well as penalty charges on missed payments or early pay off. These are often hidden fees that can make the initially most appealing loan become the most expensive in the long run.


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