Student Loan Consolidation - Five Things to Know

Upon graduation, many people find themselves struggling to pay two or more student loans. The result is that it becomes difficult to stick to a budget and without incurring late fees. A strategy that will help to get these multiple bills under control is the student loan consolidation.

Student loans can taken from different institutions, each with its different interest rate. Some may require a co-signer while others do not, payments days vary in a month, and other terms and conditions may vary wildly.

A payment, on a definite day, to an institution, with an interest rate, with a set of terms and conditions, could make life much easier and budgets much more manageable. This is the major benefit of loan consolidation. The five items should be considered when deciding whether or not to consolidate your student loans.

1. Minimum Amount

An outstanding loan debt of a minimum of $5000 must be owed to qualify for most student loan consolidations.

2. Continue Payments

The wise thing to do when applying for a student loan consolidation is not to stop regular payments to the several institutions you took the loans from. The consolidation process takes about forty-five days. If you make no payments during this time could severely hurt your credit rating and have your consolidation institution rethink offering consolidation.

3. Removing Co-Signers

Get Dad or poor Aunt Joyce off as co-signers on your student loan contracts now that you are employed. This is possible if you have proven your creditworthiness by making prompt payments in the last two to four years (depending on the terms of the original individual contracts). Make this happen before taking your first steps toward consolidation. Also check with the loan consolidation institution that you are using.

4. Consolidation Issues

To get the best loan consolidation deal you have to shop around. Several important questions have to be answered before you pick an institution for a student loan consolidation. Here are some:

·         What is the interest rate?

·         Does the consolidation require an origination fee?

·         Can I pay more each month without exacting any penalties?

·         Can I pay off the entire loan early without exacting any penalties?

·         What are the terms and conditions? Specifically, size of payment, day of month the payment is due, duration or maturity of the loan. It cannot hurt to negotiate for some thirty to sixty days before the first payment is due.

5. Last Points

The supreme goals of a student loan consolidation are to reduce monthly payment, establish an acceptable interest rate, have only one payment, and clear all others from your loans. When you establish the duration of your consolidation, consider seriously the income and expenses you will be incurring in the future. Do you see yourself having children or buying a home?

For majority of young folks, student loan consolidation is wise mainly for one reason - a manageable monthly payment.