Have you heard about loan consolidation and the idea of making less payment one creditor sounds like a dream compared to your current nightmare feeding an endless stream of money of several different lenders. No contest--where you register?
Rein myself for a moment. Consolidation might be the perfect solution for your financial woes, but then again it might not be. So before you jump on the bandwagon of consolidation, here are a few things you can consider.
Are lenders reduce consolidation loans?
In an effort to correct some inequalities federal student assistance programs, Congress recently passed the college cost reduction and Access Act of 2007, which the lender subsidy cuts, which historically have been to encourage creditors to participate in federal education loan programs. This legislation, in conjunction with the recent subprime mortgage lenders have a closer look at whether education loans and will continue to be profitable for them.
Senior Education foresee that lenders may reduce the Stafford and plus loan benefits and discounts to attract borrowers previously offered--and eliminate them altogether for consolidation loans. Consolidation loans, education loans all compressed arrived, maybe even on the chopping block for some creditors, while others may increase the minimum balance, which makes the borrower for the loan consolidation.
Even if the creditors back from business consolidation loan, consolidation is still available through the federal direct consolidation loan, but the Government does not offer incentives and rebates that lenders use to attract borrowers long ago.
Go down the interest rate?
Stafford and plus Loan variable interest rates that are based on a formula that includes the interest rate the latest Bill T change every 91 day, 1 July; It is expected that the stakes significantly falling on 1 July 2008. This reduction is to make educational loan variable interest rates are very attractive. Since the consolidation loan interest rate to calculate the weighted average of the interest rates for all credits, you would include the consolidating, you can wait until 1 July to take more informed decisions.
Consolidate: thumbs up or down?
Consolidation or consolidation: this question. But there is no simple answer.
Consolidation might be a good idea if:
o you are issued with floating interest rate and would like to have a fixed rate. It might be a good idea, but you can wait and take it only if interest rates started going back. And what happens if the variable interest rates stay down or drop below your fixed rate?
o you have a variety of loans and lenders and would like to have only one lender. One problem--perhaps pay "" for the convenience of having higher interest rates on some of your loans.
o you have more flexible repayment. Repayment options through consolidation are:
Standard fixed monthly payments.
He graduated from the start with low payments – and every 2 years.
Extension-amounts greater than $ 30000, either fixed or removed.
Income-Contingent on the basis of annual income and total credit debt adjusted payments each year, as revenue. FFEL Program offers sensitive repayment income that founds the monthly payments on a percentage of income.
Although options for flexible loan Stafford, Perkins Loan program, the program currently does not. Note: based on income repayment option will become available for FFEL or direct Stafford, Perkins, grad PLUS, and federal consolidation (less undergrad plus) loan borrowers on 1 July 2009.
o it is absolutely necessary to make your monthly payments. Beware of this option. Lower payments usually means a longer repayment term and paying more interest over time.
Associations may not be a good idea if:
o any of these loans, you plan to include have cancellation or forgiveness options that may be lost when you consolidate.
Perkins Loan Program, for example, has a, cancellation, if you teach in public schools in certain professions or subject area or some schools designated low income.
Part of Stafford loan may be eligible for cancellation, if you teach full time for five years at school. (In certain circumstances, this option may also be available for consolidation loans.)
o your current lender offers discounts (such as the annual reduction rate) for consecutive payments. You lose if you consolidate and, as mentioned previously, lenders can phased incentives for consolidation loans.
o you join during your grace period (s). The rest of your benefit period will be lost.
o you significantly reduce the amount you owe. Since the consolidation usually enlarges its repayment period, often with a higher interest rate, you might eventually end up paying more.
Research-and-conquer
Unfortunately the answer whether the consolidation is right for you score ... "it depends." to collect information about how the federal loans you have (Perkins, FFEL plus and direct loan programs) by accessing the national student loan data system (nslds.ed.gov). Collect any private education loans you directly from your creditor (s). Take information, credit and loan consolidation calculator found online can help you determine which repayment of your loan may change through consolidation.
Then ask yourself the following questions:
o I am willing to pay higher interest or extend the time for my payment and pay more interest over time?
o will lose any cancellation of the loan or incentives, for which I am now right?
o can I afford my current payments without consolidation?
o consolidation Would actually make my payments considerably more affordable?
o a "lower payments now» benefits offset ' pay more for a ' recession consolidation?
You can see that the decision whether or not consolidation does not black-and-white. This customized solution--it may work for some and not for others. Since there are the long-term effects of consolidation, do your research and weigh the pros and cons. When all the evidence, you should be able to decide whether the consolidation loan is the answer for you.
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