With the rise in inflation and expenses, it is becoming harder for a mediocre person to meet end needs. In the presence of several dilemmas, getting higher education has also become a dream of many because of ultra-expensive dues and in-affordability. To obtain higher studies, we often take student loans, but these loans may cause us high debts if we don’t pay them off on time. But, is a student loan consolidation right for you?
Perhaps, every problem has a solution, so in the case of student loans, there is a midway to refinance your pre-existing student loans using consolidation loans. To grip up to the term loan consolidation, all individuals especially students must read this article as it enlightening the significance of student loan consolidation.
How to define student loan consolidation?
The word consolidation reflects the feel of assistance and ease. It is a process in which one can finance all of his pre-existing multiple student loans by taking a consolidation loan. It is a single big loan that can compensate for the multiple debt payments.
Students have so many tasks to perform; they have responsibilities as well, so it is a convenient way to avoid getting into a mess of numerous short and long debts, you can handle them all by just having one. With the help of student consolidation loans, you can pay federal student loans as well as various private loans.
You can get one according to your college/institute expenses and can apply for a student consolidation loan online through different online money lenders. You can also visit us at https://personalmoneynetwork.com/articles/going-to-college-can-vastly-improve-your-financial-future-5-reasons-to-do-it/.
What is the eligibility criterion to apply for a loan?
First thing first, you should know either you are eligible to apply for consolidation or not. Like all other types of loans, student consolidation loan also has standards that you must be qualified for. Following are the eligibility criteria that you must read to know in which category you stand. Have a look down below;
- A student who is not enrolled in any college yet and needs a consolidation loan to get admission
- If you have multiple unpaid student loans and need assistance to refinance them
- If you have good loan repayment track record
- An individual with a good credit score is also given priority in comparison with bad credit score holders
- If you already have loans of minimum 5000$
What is the process to be followed to apply for a student consolidation loan?
There are two basic types of a student consolidation loan.
1. A federal student consolidation loan
Federal student loan consolidates multiple federal loans released by the government department of education. It may only issue to those who have federal unpaid loans at their end. It will not lower the interest rate, but an extension in federal student consolidation loans may reduce the amount per month.
You can simply visit federal loan websites and login there to approach federal aid after then you can fill the application and submit online. The federal loan department will analyze your application and status and if you qualify, they will lend you a big student consolidation loan to compensate for all of your existing loans.
2. A private student consolidation loan
You may also have heard about loan refinancing, it is a term referred to as “private consolidation”. It is a process of loan consolidation taken place through private lenders. There is an eligibility criterion that you must have to qualify, if you make the grade, the private lenders may offer you less interest rate as compared with federal loan consolidation.
You can visit online private lenders or may book an appointment to meet them personally in their corporate office. They will ask you to provide documents according to their demand, will analyze your financial status, academic expenses and repayment history, if you successfully meet the criteria, you will get a loan.
What are the upsides?
- Reduction in the monthly payment
It will help you to become defaulter due to missed monthly payments. If you choose a long term loan length, your payment will split into small monthly payment intervals (installments).
- Low-interest rate
Multiple loans have multiple interest rates; a single consolidation loan can lower the interest rates. It will help you to save your money instead of paying high interests to multiple loan lenders.
- Perk up your credit score
A student consolidation loan will perk up your credit score by helping you maintain your financial health. It makes your life hustle free and helps you enjoy the plus sides of life.
Downsides of consolidation
There are some cons of student loan consolidation, which are stated below;
- Risk of asset loss
The assets you put as collateral are always at risk, in case you couldn’t pay the loan on time, it might cost you real asset loss.
- Interest rates
Interest rates vary in different conditions. Some lenders may demand high-interest rates. Debts are debts and always have their downsides.
Considerations before choosing a lender
It is always crucial to choose wisely. Your future is in your hand, now the world has changed entirely, everything is assessable to everyone. Forever and a day, you should consider the following points before choosing a lender to avoid scams and get maximum benefits.
- Interest rates set by the lenders
- Terms and conditions of lenders
- Penalties and dues
- Available repayment choices
- Lender’s reputation
References
Article retrieved from https://www.investopedia.com/student-loan-consolidation-definition-4684455
Article retrieved from https://defynance.com/student-loan-consolidation/
Article retrieved from https://en.wikipedia.org/wiki/Debt_consolidation