The StudentLoanNetwork is an excellent place to go for information about anything related to student loans. They are a lender but primarily provide the service of allowing you to compare lenders. They also explain everything clearly to help you understand and find what you are looking for.
Regarding loan consolidation, they have a site specifically for that subject: StudentLoanConsolidator.com You will find information about both federal and private loan consolidation as well as all the benefits and different repayment options available to you.
There is a simple, online application form you can fill out to evaluate your options. This isn’t a form to apply for loan consolidation, just a tool you can use to see which lenders are relevant to your situation. Once you get the list of possible lenders, from there you can go on to apply directly to a specific lender for the consolidated loan.
Loan consolidation is not even appropriate for everyone. The purpose and goal is to get a lower monthly payment. This can happen by either decreasing the interest rate, changing the repayment term, or both. Ideally, you will get a lowered interest rate, because simply getting a smaller monthly payment by lengthening your term means that you are paying much more interest overall. The other benefits of combining your loans are the single monthly payment, which is much easier to deal with, and sometimes you can get incentives from lenders.
The most important factor in getting a low interest rate is your credit score. One good tip is that if you have federal student loans, consolidate those first, as this can improve your credit score. Apart from that, having a co-signer with excellent credit is the most effective thing you can do. The Student Loan Consolidator website explains interest rates and how they are determined. Two acronyms you will often see are: LIBOR and APR. The London Interbank Offering Rate (LIBOR) is an average interest rate set daily by banks in London which is used as a benchmark for global interest rates. It determines the borrowing rate for ten different currencies including the American dollar. The Annual Percentage Rate (APR) is the yearly interest rate you are charged on your loan. So, your interest rate is comprised of the bank’s estimated borrowing rate (LIBOR) and an added percentage fee. The Prime Interest Rate is another number banks use to determine interest charges. Rates change daily, which is another thing to keep in mind when applying to various lenders.
Student loan interest is a tax deduction, up to $2,500, so in some cases it is more beneficial to pay off other loans first. There are different options for student loan repayment:
Standard Repayment- is simply equal payment amounts spread out over the life of the loan. Equal payments, however, are not equally interest and principal; there is an equation for every loan where the initial payments are mostly interest and then payments gradually become entirely principal. That is why it is not a problem for banks to allow you to pay off your loan fast without penalty- you have probably paid most of the interest on the loan anyway.
Graduated Repayment- allows smaller payments in the beginning, and then payments increase over time, usually every two years or so. The initial payments can be only the interest portion.
Extended Repayment- is a loan with a longer term. It can include either standard or graduated payment options.
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