Weigh Your Options Before Getting Student Consolidation Loan

2008-09-24 15:55:57

( Financial )



If you have trouble repaying your student loans, then you may want to consider combining all of them into one student consolidation loan. With a student consolidation loan, you may be able to enjoy any or all of the following benefits:

* You might be able to lock in lower interest rate compared to your other loans.

* Student consolidation loan may help you avoid from defaulting your other student loans, and may make your monthly repayments more affordable. For as long as your defaulted loan has not been subjected to a court judgment or a garnishment, you may still qualify for student loan consolidation program.

* You only make payments to one lender every month, instead of having different due dates with multiple lenders.

Consolidation Drawbacks

As with any other consolidation loans, student consolidation loan has also its own disadvantages. The following are some of the potential drawbacks:

* If your old loans are charged with low interest rate, then you may find it difficult to find a lender which offers a much lower interest rate because of the current credit crunch that has been affecting the country.

* Even if you will be able to get a lower interest rate on a student consolidation loan, it may still be costly since your repayment period will be extended. Hence, more interest will be paid, or in some cases, your interest expense might even be doubled.

* Although you may have avoided the default on your old student loans, your credit report will still reflect such default and may affect your application for credit.

What to Do

Before you take out student consolidation loan, make sure to do your math. The total cost of your consolidation loan repayment should not exceed the cost of your old student loan repayment. Talk to your lender and evaluate all your options carefully.


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