Education is a very costly affair today. Especially, if you are opting for professional courses in engineering and management, the cost of education makes it inevitable that you borrow a student loan. Sometimes, the fees for courses cannot be covered in a single educational loan and multiple loans have to be opted for. The repayment period for educational loans are generally quite long.
However, invariably, managing multiple loans is tougher than a single education loan. This is obviously because the interest rates vary and the payment terms of each loan are different. Paying multiple monthly installments puts a lot of pressure on your finances. It also makes your budget planning complicated, as each individual loan has a different repayment plan and therefore their monthly installment due dates are different. Moreover, most private educational loans have a fluctuating interest rate! Therefore over the period of repayment, you may end up paying substantially more interest and even more if you are repaying multiple loans.
Some people may suggest clearing your debt using a credit card with a high credit limit. This would be a bad idea! Do not fall for the credit card trap. The interest rates offered by credit cards are very high compared to a bank loan interest. Plus, having such a high borrowed amount is not good for your credit history. In short, student loan consolidation using credit cards is a recipe for disaster.
The better way out of this is private educational loan consolidation with banks and other financial institutions. Let us see, how private educational loan consolidation can solve your problems effectively.
Private Education Loan Consolidation Facts
- Private educational loan consolidation is largely dependent on your credit history. A good credit history increases your chances of getting a consolidated loan.
- Let it be known, that you cannot consolidate federal education loans with private educational loans.
- To be eligible for private educational loan consolidation, most financial institutions require that you must have student loans amounting to at least $7,000.
- To participate in the private educational loan consolidation program, the student must have finished the educational program for which he borrowed or ceased studying.
Tips on Consolidation of Educational Loans
Here are some tips regarding how to effectively manage educational loan consolidation.
Research you Credit History
Research your personal credit history and look up your credit rating from the national information database. You can obtain it from sites, which offer a credit rating report online. If your credit points are substantially higher than what they were when you borrowed the loan, your chances of getting private education loan consolidated, are higher!
Negotiate with Current Lender
If you have borrowed multiple loans from a single lender, ask them to consolidate your loans into a single loan. The lender may agree to this proposition, if your credit rating has improved over time.
Negotiate with New Lender
Another option is to go to a new lender and submit your credit history report. If the lender is satisfied with your improved credit rating, he may offer to consolidate your loans. The new interest you will have for the single consolidated loan will depend upon the interest rates of your old individual loans. The repayment period will also be reset according to the consolidated loan amount. The advantage of private educational loan consolidation is that you may get a longer repayment period for this single loan.
Hope this article has given you an idea about what private educational loan consolidation is and how it works. To avoid later complications, always research and thoroughly examine your options before going for a loan. Initial thought may save you from all the complexities of later loan consolidation!