Whether you attended a public or a private college or university, you probably owe tens of thousands of dollars or more in student loan debt. If you are like millions of other graduates, you chose to fund your education with private student loans.
Private student loans differ from federal loans in that the private loans are issued by private banks and other lending institutions. Private loans may be offered at variable or fixed rates and come with a range of possible repayment periods (terms) like 5, 10 or more years.
If you have multiple private loans, you may be interested in consolidating your loans into a single private consolidation loan.
Advantages To Loan Consolidation
The main benefit of consolidation is that that it gives you the opportunity in most cases to reduce your monthly payment obligations. Being able to save money each month on student loans offers a huge benefit to graduates who hold a lot of debt. Most graduates – especially those in their 20s and early 30s – are busy trying to pay their monthly expenses while building a small nest egg. High loan payments but a serious damper on that goal.
Another benefit of consolidation is the opportunity to simplify one's financial life. Having to make multiple payments to different banks each month – which are due on different dates and in different amounts – is no piece of cake to manage.
Comparing Private And Federal Consolidation Options
Note that if your current student loans are federal loans, you should opt for federal consolidation. Otherwise, private consolidation is the way to go.
3 Tips For Private Education Loan Consolidation
If you are considering consolidation, here are 3 tips for you to consider:
1. Shop The Best Bank Rate: Just shaving a point or two off of your interest rate can save you a lot of money in your future consolidation loan payments. It is always worth it to spend a bit more time now shopping the rates from multiple lenders before settling upon one.
2. Check Each Company Out: Do research on each lender to make sure they are viable and represent a company you would want to do business with. For example, ask these questions: Do they have the ability to service your loans? Do they allow for easy online application? Are their repayments plans simple and easy to understand? Do they offer any benefits to borrowers who pay on time? Keep meticulous notes about each lender you evaluate.
3. Get The Payment Terms You Want: Before contacting lenders, make sure you know what your idea payment terms are. Remember: a longer term of, say 20 or 30 years means lower monthly payments now but much more paid over the life of the loan in interest costs. Tip: choose the shortest term possible while still leaving you with a monthly payment you can afford now.
Follow these 3 tips to a more successful loan consolidation.