SCHOOL LOAN: Consolidating For Convenience

2007-03-08 10:33:40

( Financial )



When you’re getting low on cash for your tuition fees, a school loan may be your immediate solution to your problem. A school loan can be obtained from federal or private loan institutions. However, the cash disbursed from an acquired school loan may not be enough to cover your expenses and you may find yourself applying for several loans.

With several loans on your tab, it may be a challenge to keep track of the payments. In addition, the repayment fees while individually minimal may prove to be hefty once they are summed up.

Once the sum of your school loan repayment fees becomes too burdensome on your budget, you may opt for loan consolidation. A school loan consolidation enables you to put all your loans into one account. This means that when you consolidate your loans, they get paid in full and you are issued a new loan with a new interest rate. The interest rate applied for education loan consolidation is the weighted average of the consolidated loans’ interest rates.

Consider however that once you decide to consolidate your school loans, there is no turning back. A consolidated loan can never be unconsolidated. It is fortunate though that loan consolidation brings more pros than cons.

A consolidated loan can bring down your monthly repayment fees significantly and extend your repayment period. It may also mean lower payment of your debt in case the new interest is lower than your individual debt before consolidating. The only possible disadvantage of a consolidated loan is that repayment begins immediately once the new loan has been issued.

While it is possible to consolidate both private and federal education loans, it is not advisable to consolidate them together into one loan. Federal school loans tend to have a much lower rate than a private education loan. Consolidating federal loans with private ones may result in higher interest rates for your federal loans. So when deciding on consolidating your loans, remember to do your homework or you may end up paying more than you should.


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