You can consolidate your debt by either Federal loan debt consolidation or approaching to the private companies. The federal loan for debt consolidation is available to the students who are in their grace period and are unable to repay their loans. But it requires that you should have at least one federal loan outstanding in you debt category.

The private companies also have their terms. They look into your or your parent’s credit score. The score should be good else you should have a consigner for your approval. They also confirm that you should be in the grace period and have no bad history of deferral. Besides this you should not have another previous debt consolidation pending with you.

Clear with all this you qualify for the consolidating your student loans. The interest is then calculated which is applied to the loan that you take. In federal loan the interest is calculated by averaging the interest rates of your pending loans. This rate remains fixed for the entire term of the loan till it is repaid in full. The consolidation loans from private companies come with the interact rates prevailing in the market. They may be fixed or variable depending upon your choice.

Why you should consolidate your student loans?
Though the loan comes with its conditions and terms but it gives you many advantages. These advantages can be summed up as follows:

1. If you take the federal debt consolidation loan then the interest that you pay can become much lower because it is calculated by averaging the interest of all the loans outstanding. The rate of interest remains fixed for the whole term. Hence there is no risk of rates going higher with market fluctuations.
2. The interest rate that you pay is tax deductable. Hence you save some money that you can use for any of your financial need.
3. You can manage your repayment more efficiently than before. By consolidating your debts you are now liable to only one lender and you don’t have to just rush to different lenders to pay the installments and maintain a record of the lenders whom you have paid and those who are still to be paid. It simplifies whole process of debt management.
4. The amount that you pay to just one lender is small. If you are approaching any private company then you can plan your installment amount according to your payment capacity.
5. The term of repayment can be anywhere between 10-30 years.
6. There are companies that do not charge any fees for such loans hence the loan becomes more affordable.

Tags: advantages of consolidating, consolidating student loans, student loan interest rates

This entry was posted on Thursday, November 6th, 2008 at 10:14 am and is filed under Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.