Should You Consolidate Private Student Loans?

Now that you have graduated college and are in the working world, it’s time to start repaying all your student loans. But should you consolidate private student loans?

Everyone has their own unique situation with regard to borrowing for college tuition money. Maybe you started with a Federal student loan, then studied some more and then had to take out a private student loan as you had exhausted all your Federal loan funds. And now you have to earn a living and the payment amounts every month are getting to be too much for you to afford.

This is when you should start thinking about the benefits of consolidating your private student loans. Private loan providers offer flexibility in that the loan can be refinanced, consolidated, or possibly skip a month’s payment if you are experiencing financial strain.

But, there are a couple main reasons to consolidate private student loans. First, it could lower your monthly payment so as to loosen up your budget a bit. And secondly, it could save you potentially thousands of dollars over the life of that loan.

If you really are battling with all your loan repayments, you really need to be careful here and consider how to consolidate private student loans. Remember that you can get into serious trouble if your loans are not paid in a timely manner. It’s a problem that many students face, but they don’t really know the true consequences. Not only will your credit be scared, you could also be left out in the cold when pursuing certain careers.

Ignoring the problem will not make it go away. In addition, if you owe money to many different creditors, you could be prevented from using your actual qualification in your search for employment. Let’s take any government position for example.

The government will catch up with you if you fail to pay your taxes and student loans, and if you find yourself in a position where you need to work with government contracts, you could well be excluded if you still have outstanding college debts. The worst would be to have the IRS searching for you and your employer putting a garnishee order on your salary! Yes, it really can get that bad in some cases. If you consolidate private student loans, that can relieve some of that financial strain and help you stay out of trouble with repayment.

Ok, so all the "warnings" aside, let's now cover what student loan consolidation is and how it can really benefit you. Remember that there are two things of importance to us here and those are:

1. Having Only One Payment

2. Getting a Lower Interest Rate

Consolidating private student loans involves putting all the loans together into one account so that you only have one payment to consider every month. And if you like, the payment period can be extended by reducing the monthly amount, so easing your financial commitments.

This can really benefit many students with regard to the mental aspect. When paying for 2, 3 or even 4 different student loans, it can get very overwhelming and you could lose track of which one's you paid, and which ones you didn't. Consolidating private student loans makes it much easier and manageable in the eyes of the borrower.

When you apply for this consolidating facility you will need the help and financial support from a co-signer in many cases. The long term benefit here is that once you have paid off your private student loan, you will have a favourable credit score. This also means that the interest rate of the loan will be based on market rates so you will not be locked into one fixed higher rate if the interest rates drop.

When you consolidate private student loans, you can have a repayment period of up to 30 years. While not many students take this long, it is good to know that there is some flexibility available should some kind of emergency occur.

So let's say you get approved, now what?

Your first instalment will be due 30 days from the day your consolidated loan was granted. Also bear in mind that private lenders charge a fee for their services and for their processing of the consolidating loan documents, and this fee could be as high as 4% of the total loan.

Private loan lenders usually have a requirement of a minimum amount before they will even consider your application, and that can vary between lenders from $5 000, to

$7 000, 00. A point to bear in mind is that any extra payments you are able to make will help tremendously and go straight towards the loan balance and not the interest.

If you are still thinking about whether or not to consolidate private student loans, remember that at this time in your life, or some time soon, you might want to buy a car, purchase a home and start buying furniture. You might be considering marriage and starting a family, so the money you save from consolidating your student loan can go towards these equally important parts of your life. And, you will have a good credit score allowing for a better interest rate on the home that you decide on. All of these aspects impact each other, so making your loan repayments on time has it's benefits.

You don’t have to worry about the possibility of not being able to repay your private student loan as there are so many avenues out there to which you can turn for help. You have no excuse for ending up in debt with a low credit score. You have to become responsible and show that you can live a stable lifestyle as you get older otherwise you will never be able to own your own home. So, start applying for that consolidation right away and stick to your affordable monthly payments. Exploring how to consolidate private student loans can get you on the right track towards financial independence!