Benefits and Disadvantages of Student Consolidation Loans

Consolidation- The Pros and Cons

<b>What does it mean to consolidate your student loans?</b>

Giving all your loans to a company which then charges you 1 monthly rate is called consolidation. The main benefit of consolidating is that your monthly payment will be lower.

<b>Benefits:</b>

Getting a lower interest rate is only one of the benefits of consolidating. Here are some additional benefits:

-Stop writing 4 different checks: Instead of writing multiple checks to all your lenders, consolidation makes it possible for you to write only one check.

-Pay less: Generally, when you consolidate, you end up with a lower monthly payment.

-Helps build credit: Once you consolidate, your lender pays off your old loans and unite them to produce one new one. Because your former loans were paid in full, your credit rating improves.

-Lock in your rate: When you consolidate your interest rate is locked in. This protects you from future increases.

Consolidation loans are great because obtaining them is so easy. You are not required to be employed, have collateral or a cosigner to consolidate your loans. Furthermore, good credit is not needed!

<b>The Problem With Consolidation:</b>

Before you run off and consolidate your loans, consider the following. Every choice generally has a downside. When you decide to consolidate, make sure you check out all the pros and cons. Here are a few drawbacks:

-Interest rates fall every now and then. If you chose to consolidate, your higher rate will be locked in.

-Once you consolidate there is no way to go back to the way it was before, or in other words "unconsolidated.

-The consolidated loan will have new terms and conditions that your other loans didn't.

-If you choose to extend the life of the loan you will wind up spending more (in interest) than you would have.

Now that you know the benefits and disadvantages of consolidating your student loans, you ought to find out if you're eligible for one of these loans. To qualify for federal student loan consolidation, there are a few requirements. You have to owe more than $10,000 in outstanding federal student loans. You have to be done with college or enrolled in under six credit hours of classes. Last but not least, you must repair any defaulted federal loans before you will be allowed to consolidate.

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