How can debt consolidation help to pay off the student loan?
Education is becoming costly day by day. Thus, most of the students opt for student loans to complete their higher studies. Well, taking out a student loan can be one of the best options when you have a shortage of money to continue your higher studies.
A student loan can be of 2 types: 1. Federal Student Loans 2. Private Student Loan.
However, taking out a loan is not enough, you have to pay it off. If you take out a federal student loan, then you have to pay it off through the federal loan repayment program.
If you have too many private student loans to tackle, you may opt for debt consolidation. However, you can’t consolidate federal student loans and private student loans together.
Can you consolidate your student loans?
Consolidating private student loans is a good idea because you can combine all your multiple monthly debt payments into a single one. Interest rates may get reduced and late charges may also get waived off.
Thus, if you opt for student loan debt consolidation, the total amount that you have to pay towards the interest charges of your loans may get reduced. You will pay less on the total student loan debt.
Federal Student Loan Consolidation
As I said in the introduction, you have to repay federal student loans through the federal loan repayment programs. You can’t consolidate your federal student loans with a consolidation loan.
You can only consolidate your federal student loans by taking out a federal direct consolidation loan. However, taking out too many federal educational loans pushes the borrower towards student loan debt. The federal government also has arrangements for direct debt consolidation loans that help borrowers repay their loans on time.
Private Student Loan Consolidation
You can consolidate your private student loans by taking out a consolidation loan. But you can’t consolidate your federal student loans through a debt consolidation program.
Here you go:
What are the benefits of student loan consolidation?
You can consider student loan consolidation if you want to simplify your student loan debt payment. Here are some benefits of student loan consolidation.
You will get lower monthly payments
When you consolidate all your student loans with a consolidation loan, you only have to pay off one loan monthly instead of making several student loan payments.
You can make monthly payments on time
If you have to make one student loan payment instead of several student loans, do not forget to make your payments. As such, you can make your monthly payments on time.
It helps to improve your credit score
With student loan consolidation, you can pay off your loans relatively faster. With a consolidation loan, your outstanding loans get paid off. Thus, your credit score can improve.
You can save plenty of money
You can save plenty of money if you pay off your student loans by taking out a consolidation loan. You need to take out a loan whose interest rate is lower than the sum total of your existing loans.
You can make electronic payments
If you opt for the automatic payment system, it will help you pay off your loan amount within the due date. You can also find many lenders who offer discounts on electronic payments.
You will get a fixed interest rate
Student loan consolidation gives you the advantage of low fixed interest rates. Student loan debt consolidation rates should not exceed 8.25%.
There is no prepayment penalty
If your financial condition improves, you can pay off your loan entirely. You do not have to make any sort of prepayment penalties.
Can you consolidate student loans with bad credit?
Usually, lenders check a borrower’s credit before approving the consolidation loan. So, if you have bad credit, it may be difficult to get a loan to consolidate your student loans. You generally need to have a credit score of around 700 to be eligible for a new loan.
However, few lenders offer bad credit loans. You might have to explain the reason for your bad credit, and if the lender is convinced, you might take out a consolidation loan. It is difficult but possible.
Here’s how you can consolidate student loans with bad credit
Get a creditworthy co-signer
Apply for a consolidation loan together with a person who has good credit. Find a co-signer who has a good credit score and a lender who allows co-applicants. You can request your family members or friends to cosign the loan.
Get a loan from a credit union
Credit unions often offer loans for people with bad credit. They even offer low-interest rates on the loan. You should check with local or national credit unions to get a consolidation loan, which is designed for people with bad credit.
Check with non-profit organizations
Some non-profit organizations help people to get rid of their student loan debts. They often offer free credit counseling and debt assistance. Find a non-profit organization to get connected. You may explain your situation to a representative, who might help you to obtain the loan with bad credit, through the organization.
Lastly, make sure you make monthly payments on your new consolidation loan. Try to get a good job to ensure a fixed monthly income. If you are not getting a good full-time job, you can start freelancing or part-time job to earn money.
Search online to find ample job opportunities. Also, students who are currently pursuing higher studies shouldn’t take out multiple student loans. Because they should pay off the loans.
If they don’t pay off their loan, then they have to file for bankruptcy to get out of the debt. Thus, a student should manage their student loan properly.