When you first find yourself out in the real world, it is not uncommon to find that your expenses exceed your income. Often many of your bills are fixed and cannot be negotiated down. However, your student loans may be one area where you can reduce your monthly expenses. Many times, student loans are able to be consolidated.
What does it mean to consolidate a student loan? It means that you have arranged, with a financial institution, a different repayment schedule for your outstanding debt. Typically they will either buy your outstanding notes or arrange to make payment to the originator of the loan on your behalf. In turn, you pay them monthly. Debt consolidation results in a lower overall monthly payout by you, the borrower. However, the repayment schedule for the loan is often longer, meaning you will wind up paying more in interest over the life of the loan. Many people seek out debt consolidation loans because they cannot make their monthly payments and need to try to lower these. If you are in a situation like this, a student loan consolidation can be the answer to your problems.
You may also want to consider consolidating your student loans if your credit rating has improved since the time you attained your original loans. Banks and other financial institutions offer better loan terms to people with better credit scores. The reason behind this is because people with better credit scores are less likely to default on a loan, and are therefore a lower risk for the financier.
If your student loan has a grace period (most student loans do) you may not have to start repaying your loan for a few months after graduation. Typically your interest rate is lower during the grace period than it is after the grace period has expired. Since the interest rate on a consolidated loan is based on the rates of the outstanding loans being consolidated, it may be a good idea to consolidate your loan during this period. Bear in mind however, that consolidated student loans usually require immediate monthly payments, which means you will have to start paying on your new loan immediately instead of a few months down the road.
If you decide that you need or want to consolidate your student loans, it is important to carefully research the loan agencies you are considering. You school will be able to assist you through their financial aid office. They may even be able to suggest a number of different lenders for you to consider. Just make sure to do your due diligence. Check the lending agencies out via the Better Business Bureau, your state Attorney Generals Office and do an online search. If there are consumer complaints, you will easily turn them up via these avenues.
You should also check with your original lenders. They may be able to consolidate your loans for your. Do not feel obligated to go with them however. You may do better with another financial institution. Shop around. You are looking for the best terms you can find.
Another thing to consider are the fees associated with consolidating your loan; interest rates and monthly payments are not the only expenses you will incur. In addition to any loan origination fees you should understand if there are any pre-payment penalties or other hidden fees. These can make your loan considerably more expensive over the long run.
Consolidating your student loans can be a good way to help keep your day to day living expenses manageable, especially when you are first starting out, especially if you are struggling to make ends meet. As with any loan, make sure that your lender is reputable and try to get the most favorable terms you can.
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