You might be reading this article, because you have more than two student loans on your shoulders. Well, some students consider loan consolidation as a potent solution against hefty interest rates and numerous loans. As suggested by its name, consolidation is the process of taking a new loan to repay older ones. Conversely, you should reimburse only the new loan with a different interest rate. Loan consolidation has many indispensable benefits and drawbacks. As potential applicant you must be aware of those pros and cons. Here in this article, you will get a comprehensive insight through the benefits of consolidating student loans.
Benefit #1 – An Easier Billing Process
First of all, student loan consolidation will make the billing process easier. If you have more than two student loans to be repaid, you should keep up with several due dates and deadlines. Most students consider this as a daunting process and fail miserably. On the other hand, if you have only one loan, you should sign only one cheque and remember only one due date.
Benefit #2 – Extended Reimbursement Period
Consolidation will help you extend the reimbursement period. According to experts, you can keep up with your day-to-day lifestyle, when you extend the loan’s duration. This is because longer loans will have smaller monthly payments.
Benefit #3 – Reduced Rate of Interest
It is quite interesting to note that student loan consolidation will help you reduce the debt’s rate of interest. If a special student loan has improved your overall credit score, you can use this loan to reduce the consolidated loan’s interest rate. However, verify if the lender will let you pay at the lower interest rate.
Benefit #4 – Interest Rates Shift
Consolidation will let you shift from variable to fixed interest rates. For instance, if you have a private student loan with variable interest rates, you can switch to a private student loan with a fixed rate of interest. In most cases, you will be better off with student loans that have a fixed rate of interest.
Benefit #5 – Choosing Flexible Plans
Life’s circumstances and possibilities would change drastically from the minute you sign-up for a student loan and start repaying. Generally, student loans have a reimbursement period of 10-years. Nevertheless, based on your financial situation, you can opt for different types of repayment plans. Here are few examples of such student loan consolidation repayment plans:
- You can extend the reimbursement period from 10 to 30 years!
- You can opt for graduated repayment schemes. These programs begin with low monthly payments and increase gradually, based on the applicant’s financial stature.
- You can opt for reimbursement plans that are based on the applicant’s income. Plans that are income sensitive will help you lead a planned and well-composed life.
Benefit #6 – Switching Lenders
Finally, student loan consolidation will let you make use of various borrower benefits. These benefits will differ from one lender to another. If your lender doesn’t have student friendly plans, you should shift to another lender with better deals and offers.
On the whole, you must take into consideration many factors before consolidating student loans. After all, the option is not meant for everyone!