If you are one of the millions of people that have several student loans that you are currently paying on you might have considered consolidation. This option can certainly make your life simpler every month when it comes to remembering to pay everything that you have due, but it’s important to know some of the facts before you make the decision to consolidate your student loans. The usual consolidation loan for this type of debt is made through the Department of Education and, as with everything, there are good points and bad points to going through with them.
The Benefits of Trying To Consolidate Your Student Loans
Of course, the main advantage of going through with a loan consolidation for your school debts is that one monthly payment. This makes it much easier to get your loan paid on time. In addition, you might that they offer you payment plans that are more suited to your personal finances. One of these is even based on the income that you bring in every month, which is helpful when you might be having trouble making ends meet.
When you consolidate your student loans you might also find that you total payment is reduced. This is because they have longer repayment in general, so it gets spread out a little more. In addition, you may also fins that you have a lower interest rate to go along with it. Because they will switch you to a fixed annual percentage rate, you can find yourself in a much better position to get your loans paid off easier. This is also a good thing for you because it sets you up for the future well. It means that no matter what, you will always remain paying that interest rate, even if they go up later.
The last benefit of deciding to consolidate your student loans is simply that doing so will not affect your credit. This can actually work in your favor, as well because if you are paying several loans and keep paying them late or missing payments then you are already negatively affecting your rating.
Some of the Bad Sides of Trying To Consolidate Your Student Loans
Now that you understand all of the advantages of this process, it’s time to look at some of the ugly parts. After all, if it were good things, then no one would ever question consolidation. The biggest disadvantage of consolidating your student loan is that it can lead to you paying a higher amount in the end. Because consolidation can spread out your loans terms, your monthly payment might be lower, but it can add more interest to the overall amount.
In addition, while those fixed interest rates can be a good thing most of the time, if you enter your loan consolidation during one of the fluke periods right before national interest rates fall, then you are still going to be stuck paying that higher amount.
There is also one more thing to think about when you are trying to decide if you should take the step to consolidate your student loans. Check on your current loan holders and make sure that you that you aren’t getting any special bonuses for leaving the loan in their hands.
What Is The Right Choice For You?
Because of a new law passed by Congress, you are guaranteed to have an interest rate that is fixed for the life of all of your new student loans. The rate will be determined by the market and they will be set every June. This is good news, because even though interest rates can still be varied, you will know exactly what to look forward to when you sign on a new loan from now on. This does mean that the advantage of loan consolidation making your interest a fixed amount is now null and void though, as long as it’s a new loan that you are considering.
One of the more important things for you to consider is what you are willing to give up for the ability to be on top of your finances at this very moment. If you are having trouble making ends meet, then it can be helpful to consolidate your student loans. This is true as long as you remember that it will mean that you are going to be paying more in the long run in exchange for that lower payment. On the other hand, if you are comfortable with your payments as they are then you are better off keeping them as they are and just paying them off faster and with less interest.
There is a lot to keep in mind when you are trying to figure out the best route for your financial decisions, however hopefully this guide has made the decision a little bit easier for you to decide.