When you choose to consolidate college loans, it’s important to note the type of loans you wish to combine. Many financial companies advise against consolidating federal and private together. Federal loans typically have a fixed interest rate and better benefits as opposed to private loans, whose interest rates are determined by your credit score. Some lending companies may also offer a separate program to consolidate federal student loans and also for private student loan consolidation.
Take note that consolidating Student Loans is a method of refinancing. This means that a company will pay off your outstanding loans with a consolidation student loan, creating a single payment. It’s important to factor this amount into your budget to ensure that you can comfortably make the payment on time.
You should consider consolidation if your still owe a large amount of money on your student loans and your loans were taken out through multiple lenders. If your loans are still under grace period, you should wait until after it expires, as consolidation loans typically do not have a grace period and payment starts immediately. It’s also not recommended to consolidate loans taken out by your spouse into one loan either, as both parties will be responsible for paying the loan no matter what happens to the relationship. So avoid including your spouse’s obligations when considering refinancing.
Cosigning is another aspect you should also take into consideration with your education loan consolidation. Some lending companies do not require a cosigner based on your income and credit background. However, if your concerned your credit isn’t up to par, you may need to find a credit-worthy cosigner to avoid paying a higher interest rate. Companies vary with their cosigning practices. Some lenders may release a cosigner after a period of time contingent on terms of the loan. For example, if you make the first 48 payments of your consolidation loan in a timely manner, the cosigner will be released. Check with the lender to verify their policy and practice.
Student loan refinancing is a serious matter. You can only consolidate them once unless you return to school and acquire additional student loans. Careful research of refinancing companies is essential in determining the right consolidation loan that fits your needs and budget.