When To Consolidate Private Loans

2007-03-08 10:33:40

( Financial )



Private loan consolidation is a way to consolidate all your private, non-federal loans. If you want to consolidate private loans, you can consolidate all non-federal student loans as well as education-related credit card debt. You will write fewer checks and you can get a better rate compared to paying each loan separately.

If you have a combination of private and federal student loans, it is recommended that you consolidate your federal loans first. Taking care of your federal loan obligations before you consolidate private loans has a positive effect in your credit score. The federal government determines the interest rates for federal loans while your credit score determines your interest rate for private loans. The better your credit score is, the better your interest rate will be when you consolidate private loans. The interest rate for private loan consolidation is determined by a prime rate that is adjusted monthly plus a percentage based on your credit history.

When you consolidate loans, you combine all your debt that was used to pay for your education. This includes credit cards with very high interest rates. Anyone with outstanding private loans can consolidate their debts. You can visit your local student assistance center for a list of lending institutions that can help you with the consolidation process. Parents can consolidate their children’s student loans into one. The same premise goes for married couples.

Besides education-related debt, a lot of lending institutions now also accept retirement plan loans, home equity loans, credit card debt and travel-related loans for private loan consolidation. Consolidating private loans saves you money each month by providing you with a competitive interest rate against non-federal loans.

You always have to remember that interest for private loan consolidation is generally higher than federal loan consolidation. Consolidating your private loans does not only give you a lower interest rate, you can avail of more benefits as well. So if you have government loans you want to consolidate, you should go with a federal loan consolidation rather than a private one.


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