Have you collected different student loans to the extent that the interest you have to pay is overwhelming? There is a way out. Consolidate your student loans and reduce the overall interest rate to the possible minimum; find out how to do this.
What does it mean to consolidate your student loans
One thing you must note is that it takes 2 or more loans to consolidate.
Loan consolidation is the act of using a larger loan to pay off several small loans so as to reduce the total interest rate or lower the monthly repayment amount.
Forms of student loan consolidation
1 Secured loan consolidation; This type of consolidation consolidation requires a collateral such as your home or land or car.
2 Unsecured loan consolidation; This one requires no collateral but you need a high credit score for this type of consolidation to be approved for you.
Risks of student loan consolidation
- You may lose your property if you opt for the secured student loan consolidation.
- You may run into more debts just because of the idea of consolidation.
- If you default in your repayment, your cosigner will be in for trouble that is if your loan required a cosigner.
Benefits of consolidating your student loans
Most private companies offer student loan consolidation at a lower interest rate.
Federal government offers student loan consolidation by reducing the amount to be repayed monthly while keeping the interest rate fixed.
Types of student loan consolidation
We have federal and private student loan consolidations. Private student loan consolidation is also called refinancing.
It means replacing multiple student loans be it private, federal or a combination of the two with a single new private loan.
Your financial history such as credit score, income, job history (if any) and educational background will determine your new interest rate.
You will need a credit score that is up to 600 and above, and you should expect your interest rate between 2 & 9%.
Requirements for private student loans consolidation
- you must be out of school before you can consolidate any loan
- you must have a stable job
- a good credit score is needed
- if you cannot fulfill what is stated above, then you need a cosigner who can.
Note; If you consolidate your federal student loans into private, you will lose all the benefits that comes with a federal student loan.
- Log on to the appropriate website
- click on “complete consolidation loan application and promissory note”.
- select the loans you want to consolidate
- choose a repayment plan
- read the terms before submitting the form
- continue your usual student loan repayment until your servicer confirms a consolidation
Note; You will be required to finish the application in one session, so gather all required documents before visiting the site.
Requirements for federal student loan consolidation
- you must be a graduate
- you are a defaulter and wants to get back on track
- you must need a single federal loan and repayment plan
- you must to be eligible for loan forgiveness or income-driven repayment plan
Note; You can’t consolidate private loans into a federal loan.