The Benefits From The Consolidation of Student Loans

2007-03-08 10:33:40

( Financial )



What is a student loan consolidation?

Student loan consolidation is usually defined as the act of combining several student loans into a single loan, in an effort to minimize the required monthly payments, as well as prolong the repayment period. Smaller payments and longer repayment periods means that getting out of debt will be much easier.

The consolidation of student loans offers many benefits. These days, student loan programs are offering interest rates at record lows, so there is absolutely no reason why you should not consider the consolidation of your student loans. By doing so, you will literally save yourself thousands of dollars in interest charges, making your future financial situation that much better.

The Types of Student Loans

There are many types of student loans, but the most common are private student loans and federal loans.

Private student loans are those that are offered by traditional lending facilities, such as banks. These loans usually charge a high interest rate and can be a little difficult to procure, especially when compared to federal student loans.

Federal student loans are loans that are offered and managed by the US federal government. These loans are simple to obtain and are normally packaged with student-friendly interest rates. The low interest rates are part of the government’s support for the education system.

Because interest rates are much lower with federal student loans than with private student loans, you are generally better off with the former.

The Consolidation of Student Loans: The Benefits

There are two main benefits that will accrue to you when you decide on the consolidation of your student loans.

First, you will realize a significant savings in terms of interest charges. Consolidating your loans into a single will usually result in a smaller, fixed interest rate. The result will be less debt, because you will effectively pay smaller amounts for the years to come.

Second, you will improve your credit score. The more loans that you have outstanding, the lower your credit score will be. Your consolidation of student loans will combine all your loans into a single one. Over time, this will result in a better credit score, especially when your records are compared with others who have not consolidated their loans.


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