best student loans consolidation

Online consolidation calculators can help you understand the tradeoffs of consolidating your loans. It compares the reduction in the monthly loan payment with the increase in the total interest paid over the lifetime of the loan. It also shows you the interest rate on your consolidation loan.

%u2022 Before consolidating, always evaluate the benefits provided by the current holder of your loans. The loan discounts offered by originating lenders tend to be superior to those offered by consolidating lenders, since consolidation loans have tighter margins. Also, if you received a fee waiver or rebate from the originating lender, you may have to repay that discount if you consolidate with another lender.

%u2022 You can change the repayment schedule on your loan once per year. So consider starting off with standard ten-year repayment on your consolidation loan. You are not required to start off with extended repayment. If you find it difficult to afford the payments, you can always switch to extended repayment later.

%u2022 Before you can consolidate with any lender, it's generally a good idea to talk first with the current holder of your loans. They have all the paperwork, so the process is often simpler with the current holder of your loans. This establishes a baseline against which you'll compare other lenders. Another lender may offer better customer service or loan discounts that make it easier to repay your loans. (Note that completing a consolidation loan application takes only about half an hour, so the paperwork burden is minimal even if you use another lender.)

%u2022 Until you receive notification that the consolidator has paid off your original loans, continue making payments on those loans. You don't want to go into default on those loans, since that would prevent your consolidation loan application from moving forward.

%u2022 It can pay to shop around. Although federal law sets the rates on student loans, those rates are the maximum rates. Nothing prevents a lender from charging lower rates. Many lenders offer loan discounts for having your monthly loan payments direct debited from your bank account (e.g., 0.25% interest rate reduction). They may also offer an interest rate reduction for making on-time monthly payments (e.g., 1% interest rate reduction after 36 months of on-time payments for as long as you continue making on-time payments).

%u2022 Note, however, that if you are late with a single monthly payment, you lose the interest rate reduction permanently. Less than 10% of borrowers succeed in obtaining the full benefit of an on-time payment discount. (Even borrowers who sign up for automatic direct debit of the monthly payments can miss a payment if they have insufficient funds in their account.)

%u2022 We recommend focusing on the discounts that you can't lose, such as discounts for signing up for direct debit of the monthly payments. Next look for discounts that are more immediate in nature, such as those that offer a reduction in principal or a rebate of the loan fees. When a repayment incentive requires on-time payments, prefer those that involve a shorter time period before you can qualify for the discount. A discount that is suspended for a short time period after you are late with a payment is better than one that terminates after a single late payment.