A student loan consolidation is referred to as the process of collecting all or some of the student loans into a new loan. By doing consolidation, the borrower will be able to have one student loan that comes with interest rate, payment and term. Most people would usually refinance or consolidate the loans of their student in order to simplify and lower their payments.
A Student consolidation loan will lower the payment of the student. However, it still varies on the borrower. The benefits a borrower will get depends on the kind of refinancing and consolidation they are considering to have that can also be contingent on their loans. It can be a big help for the students in order to lower their payments.
For a borrower to figure out the type of refinancing or consolidation that is best for them, it is very important to understand the two major types of student loan consolidation the federal direct loan consolidation and the private student loan consolidation.
Both the federal direct loan consolidation and the private student loan consolidation can reduce the headache of having multiple student loans. On a broader aspect, a federal student loan consolidation can help in creating a flexible payment. On the other hand, a private student loan consolidation is usually done in order to get a good rate of interest.
A Federal consolidation loan is provided for the borrowers who have federal loans but no longer goes to school. It is done though media by the Obama Student Loan Forgiveness. In general, the consolidation of federal loan are very much easy to apply and qualify for. Aside from that, it also offers a number of beneficial aspects as compared to private loans.
A Federal consolidation loan does not require a credit check and it is widely available to those borrowers as a default of their loans. It also preserve a flexible federal direct student loan like deferment, forbearance as well as options that are income driven.
The many aspects of a federal consolidation loan that can benefit a borrower are as follows:
As long as you do not have any wage garnishment against you, you will surely consolidate your student loan if you are in default. One of the best ways to get a fresh start is to enroll in a replacement plan based on the income. Those borrowers who have an existing wage garnishing, they first need to undergo rehabilitation before they become completely eligible for a consolidation.
Federal loans can be consolidated after a student has graduated, leaves the school or below the halftime of the enrollment. It may not lower the rate of interest but it can take away the weighted average rate of the loans you already have. Since a federal refinancing or consolidation may not lower your rate, then you may want to consider having a private student consolidation loan. Also, keep in mind that not all federal loans are not automatically enrolled on income driven plans. Therefore, you need to choose this kind of option every time you consolidate and take advantage of these things.
Far from a federal student loan consolidation, a private refinancing can be done both for federal and private student loans. It works perfectly in refinancing a mortgage which generally serves as the biggest benefit of a private student loan refinancing or consolidation and provides a lower rate of interest. Over the loan term, a small interest rate reduction only means that there is a big saving for the borrower. These lower interest rate is available for a number of reasons such as the following:
Because of the fact that it can effectively carry out a new loan from a privately owned lending company while doing payment on the old loan, in general, it will become harder to qualify for a private refinancing. Most of the time, those people who qualify for and has received the greatest benefits from a private refinancing are considered to be borrowers who are credit worthy.
Always remember that when you are evaluating your consolidation options, it is very important to consolidate a federal student loan into a private one since you cannot enjoy the federal direct program. If you are a borrower who has a social stability of finances, it would be fine for you but to those people who have less financial stability, it is very important to consider this thing.
Because of the fact that a private student loan consolidation is done by those private institutions, an automatic eligibility is not required. However, you will be judged based on your credit worthiness. When it comes to the aspect of lowering your loans, it merely depends on your current worthiness as well as on your current rate. If you have a good credit score as well as a high rate, then you will be able to have a good chance of owning a spot.
There are no forgiveness programs that are being offered in a private student loan consolidation but there are some law firms who specialize on student debt relief as well as in private student loan relief that can help a borrower identify the firms that specializes on it.