Private Student Loan Consolidation - What You Need to Know

Only a tiny fraction of college or university students graduate debt-free, either because of a full scholarship or wealthy parents who can afford to pay school fees. Majority do not have a choice than to borrow or take out student loans to support their education. Since most students are not qualified to receive central government financial aid to buttress their fees for higher education, "private student loans" are the easier solutions.


Student loan, like every other is a debt which has the interest. But how can the students pay back their student loans during an economic crisis? Well, the answer is consolidating all their private student loans into one to relieve the financial burden.


Is private student loan consolidation a good thing? Yes, because it is combining all previous student loans into one manageable loan thereby making it easier for the students to pay the debts. With consolidated loans, you don't need to pay multiple loans monthly. You only have a single loan to pay and this makes it less complex and troublesome.


One other reason private student loan consolidation appeal to people is that it can reduce your monthly payment and interest rate considerably. Also, it also students a fixed monthly interest that is usually lower than those previous loans, because interest rates these days of economic crises are decreasing. This can easily help you to reduce your monthly payments by half depending on the interest rates.


Typically, loan consolidation lengthens the repayment period, thus giving the students more time to pay their debts. This also helps students lower the monthly payment because of longer repayment term of their loans. This is very good thing so that the students will not feel pressured to make monthly payment on time.


Finally, consolidation loan operators offer students better offers. They may be able to receive no prepayment penalties, thereby making all payments in excess of scheduled payments go straight to the principal. This way, the consolidated loan can be paid off early without penalties.


Private student loan consolidation also has negative sides to it. For instance, if you decide to consolidate your loans and extend the repayment period, it leads to an "increases in general total amount paid" while lowering your monthly payments. 


Also, the interest rate of the consolidation loan is based on one's credit worthiness. Sometimes, it can attract higher interest charges than the previous loans and students might have to pay more fees (like 5 percent of the loan amount) for obtaining such loan consolidation from some lenders. Therefore you should consider all the pros and cons and shop for your student loan carefully.