Student Loan Consolidation – Figuring the Benefit

If you have multiple private student loans, you have to make payments to two or more lenders at different times of the month. Some of your loans probably have fixed interest rates while others have variable rates. The repayment terms are probably rather different among them as well. Having to make multiple payments a month can wreak havoc with any budget. You probably did not give it much thought when you were wrapped up in your studies, but multiple payments can add up to hundreds of dollars each month.Consolidation of Private Student Loans Makes CentsConsolidation of student loans made by private lenders makes sense, especially it you are having trouble making your monthly loan payments. Consolidation is an easy concept. You approach a lender who will give you the money to pay off all those other student loans so that you thereafter only have to make one payment, that you can afford, to one lender, with terms you can live with.Consolidation FactsConsolidation loans will be a boon for a number of reasons. First, you become responsible for only one payment a month. Next, your payments will become smaller for two reasons: Your interest rate will be lower. The repayment time can be stretched over ten to even thirty years. Finally, you can negotiate a fixed interest rate that will be locked in over the life of the loan so your payments do not vary.Do It Yourself ConsolidationIn preparation for shopping around for a student loan, you must have a good idea of the financial challenges you know face regarding your various loans. Following are five easy steps to get you on track.1. Figure Your Current Interest RateYou need an interest figure to use as reference when you shop for student loan consolidation assistance. What you need is the weighted average of your existing loan rates. As an example: Say you have three loans a 5%, 3%, and 2.5% interest rates. Next, check your loan documents to determine how much you still owe on each. Say you have three loans where you still owe 20%, 30%, and 50%, respective to the above rates. Multiply these percentages by the interest rates for each loan and add them together. Your equation should look like this: (20% x 5%) + (30% x 3%) + (50% x 2.5%) = weighted average interest rate.2. Figure Your Ideal RepaymentUse a loan calculator, many are available on the Web. Plug in your current outstanding balances to get the total of all loans. Then plug in an interest rate you can live with. After that, plug in repayment periods such as twenty, twenty-five, or thirty years. As you plug in different figures you will see how one affects the other in terms of repayment.3. Build Your Shopping ListNext, look for lenders who are offering student loan consolidations. Most can be found on the Web. Gather at least five prospects. Do less and you will end up cheating yourself. You are shopping, after all.4. Contact Your Prospective LendersApply to all five of the lenders you have found. To ease your shopping, use the same figures as far as interest rates, repayment amounts, and length of the loan.5. Make Your ComparisonsCompare each offer you get with the others. It is very important to read any fine print at this stage. The most important information is the interest rate; make sure it is constant over the duration of the loan (not variable) and that it is an amount you can live with.Following these steps will help you get the best deal on wrestling your school loans into a manageable form. And help you get some peace of mind regarding your finances and budget.


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