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If you are having trouble repaying your student loans or keeping all your debt in order, then you should consider consolidating them. This will enable you to stay organized and keep up with your repayment plans.
When you consolidate your debt, the financier will pay off all the debts you have and give you a new loan for the total amount.
Here are reasons why you should consider consolidating your student loans.
It will simplify your bills
Many people tend to have several student loans that they need to repay every month.
Consolidating your student debt will help you to organize your finances and save time because you will not mistakenly miss any payment.
You will have a much easier time with your loan payments because you will be dealing with a single lender and pay one loan.
Different repayment options available
There are different lenders who offer a variety of repayment plans for your debt consolidation.
You can lower your monthly repayment plans by switching to an extended repayment plan or an income-driven plan. When you decide to consolidate your student loans, you have the option of choosing a new repayment period.
For example, you can choose between a 20-year and 5-year plan and an affordable monthly repayment.
Reset your deferment and forbearance timelines
Private and federal student loans usually have limitations on the length of time they can be placed on deferment or forbearance.
These are temporary periods when you do not have to make your monthly loan repayments. Since consolidation results in a new loan, the deferment and forbearance limits may be reset in the process.
This is especially important if you have had repayment problems in the past and you wish to have these options in the future.
It is free
Consolidating your student loans on your own will not cost you anything. The online application will just take you about 30 minutes to complete.
You can easily apply for the federal loans consolidation through the mail on a paper application or online.
Your eligibility for consolidating your federal student loans will depend on the type of credits that you have and not your income or debt.
New interest rate
A consolidated loan will have the combined interest rates of all your student loans.
This means that you will still owe almost the same amount that you are currently paying and the same interest for the entire period of the loan.
You can change your repayment plan to get a consolidated loan that will give you a better interest rate whether variable or fixed.
As a result, you may end up with a lower interest rate than what you were previously paying.
Lower monthly payments
Refinancing your student loans may also change your repayment terms. Most private and federal loans usually carry a 100-year repayment term.
Even though student loan consolidation options will vary depending on the financier, you can get a repayment plan of five to twenty years.
By increasing your loan term on the new loan, you can significantly drop the monthly payments. This will help in increasing your cash flow every month.
Improve your credit rating or score
Having multiple student loans can take a toll on your credit score. This is especially true if you fail to honor your repayments or are always late repaying your debts.
However, consolidating your loans means that you will only have to deal with a single lender and one loan.
Paying your debt and reducing the number of loans that you have is an excellent way of improving your credit rating. This is important because banks and other lenders will always check your credit scores before lending you any money.
Peace of mind
Individuals with many loans may always have sleepless nights every day. This is because they always wonder how they will be able to pay their monthly repayments.
The stress can be elevated, especially if you have to deal with different repayment dates and get countless calls from different lenders.
Consolidating your debts can help you save up to about 50 to 60% on your repayments each month. You will also pay your other bills with ease every month.
Switch to a caring lender
Most borrowers are usually unhappy with their current education loan lender.
Refinancing your student loans gives you the option of switching to a bank that provides better customer care services and cares about your interests.
You can use online reviews from other consumers to help you make a decision between lenders.
Consolidating your loans may be one of the most intelligent and responsible decisions that you will ever make regarding your college finances.
This is because it can be challenging to pay your monthly bills if you have taken several student loans.
When you add up the amount that you will be paying to each lender every month, you find that the picture is not that pretty.
With a consolidated student loan, you can combine all the debts into a single loan and you will only be responsible for making payments to one lender every month.
Marina Thomas is a marketing and communication expert. She also serves as content developer with many years of experience. She helps clients in long term wealth plans. She has previously covered an extensive range of topics in her posts, including business debt consolidation and start-ups.