Are you facing difficulty to pay off your student loan debts? If yes, then student loan consolidation might be the right option for you. It is a process by which you replace all your monthly payments toward your student loans with a single payment every month. However, it is not possible to repay your student loans with the help of a consolidation program; you need to take out a consolidation loan to repay your dues.
Eligibility criteria to take out a consolidation loan
You need to satisfy the following eligibility criteria in order to take out a personal loan for student loan consolidation.
- You should’ve a good credit score to take out an unsecured consolidation loan.
- You should have multiple student loans from several lenders.
- You’re facing difficulty to make the monthly payments on your student loans on time.
How consolidation loan helps to repay student loans
A consolidation loan is similar to a personal loan that you can obtain from any financial institution. You need to take out a loan that is sufficient to pay off all your student loan debts. Thus, you actually combine and replace your multiple student loans by a single consolidation loan. So, you need to make a single payment every month in order to repay your new loan. Moreover, the interest rate on the new loan is usually much less as compared to the sum total of all your student loan payments.
In this way, you can consolidate your federal as well as private loans (with different terms and conditions) by taking out a consolidation loan.
The advantages of student loan consolidation
Student loan consolidation offers several advantages, which are given below.
- Several monthly payments can be combined into a single payment every month.
- The repayment term of the new loan can be extended thus making your monthly payments affordable.
- If you have a good credit score, then you can take out a loan without pledging any collateral.
- It is quite easier to manage a single loan (and a single monthly payment) rather than making several payments every month.
Apart from consolidating and paying off your student loans, you can also repay your other debts with the help of a consolidation/personal loan. As for example, if you have a car loan to pay off, then you can take out an amount that is sufficient to pay off your other debts as well. However, you should assess your financial condition and take out a loan whose terms and conditions are suitable for you. It will help you to make the monthly payments on time and thus repay the loan within the stipulated loan term.
There are basically two kinds of student loan consolidations Federal and Private. The simple difference is that a Federal student loan consolidation it is awarded based on the financial need and not your credit score where as a Private is awarded based on your credit score. Because of this difference you are often forced to get a cosigner on Private Student loan consolidations but not necessarily on Federal. There is a complete list of student loan consolidation companies available here. Read the rest of this article to understand how a student loan consolidation can help you get out of debt sooner.
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