Loan consolidation companies are always eager to rope in students with new loans and help them pay off their tuition and cost of living associated with college. Consolidating loans sounds easy enough: combine all loans and credit card debt into one easy monthly payment, but those who don't do their research can end up paying more money than they should be.

Here are seven easy steps to find the consolidation loan plan that is right for you and avoid the problems that are associated with loan consolidation.


Loans rely mostly on a student's credit score, as it shows how reliable he is with balanced debts and their payments. Not only does a good credit score make it more likely for a student to obtain a loan, it can allow for the student to consolidate his debts at a much lower rate, especially if his credit score has improved since obtaining his student loans.



One should consider all options available to him and compare the interest rates and benefits of different consolidation companies. One such decision is whether to decide on a secured or unsecured loan. A secured loan has lower interest rates, and if the student goes into default, then the underlying asset can be sold to make up the money. An unsecured loan does not have an underlying asset attached to it. However, the choice is dependent on one's credit score.


Pay Back Student Loans

Creative Ways to Pay Back Student Loans


The cost of monthly payments aren't the only thing the student should focus on in deciding which loan consolidation company he should go with. The student should also pay attention to the interest rates, closing costs and if there are any tax implications. The student should also compare these costs to what he is currently paying on his loans, if he's deciding to consolidate.



Reading and understanding the loan consolidation contract is key to not getting into something the student can't handle. Loan contracts can be difficult to understand, so he should not be afraid to ask as many questions as necessary as often as possible until he full comprehends every aspect of the consolidation process and fees associated with it. If necessary, the student can ask a third party for help in explaining the terms of the contract, especially if it avoids going into default later on.



Credit insurance is a policy for the protection of both the lender and the debtor when the loan can no longer be paid, such as the debtor dying or becoming insolvent. It can be targeted as a “piece of mind” for both parties involved, as the lender gets the full payment of what he is owed, while the remaining balance on the debtors part is completely absolved.

However, credit insurance can add large costs to the loan consolidation process, making it a lot more costly than it should be. Getting credit insurance is not absolutely necessary and should be avoided when possible.



Completing the full application process is the last step in the consolidation process. The student should double-check to ensure that he's receiving the rates he was quoted. If anything is different, he should see why and research if there are better options available.



Even after the consolidation process, the student should budget his money in order to ensure that he can make the payments every month. Going into default makes the loan process much more costly to deal with.

Loan consolidation does not need to be a nightmare for the student taking out new loans. With a little bit of research and careful spending, student loans can become less of a problem.