Student Loan Consolidation

 Getting Out of Debt      

It is often said that with student loan consolidation, students and graduates can save thousands of bucks in interest charges. 

When we talk about college graduation, several promising life changes occur in our minds – potential careers, independence as well as new beginnings.   However, although it means beginning of something, it still signifies something less enjoyable too – the repayment of student loans. 

As you all know, the repayment of ample student loans can be off-putting for both students and their parents. It was found out by the Public Interest Research Group in the  US that the average debt among student borrowers is currently in excess of $16,500. That large! The Associated Press also noted that graduates of public colleges and universities usually emerge owing more than $10,000 for their undergraduate years alone.  Those who are in private institutions typically owe $14,000, while the graduate-level students often owe more than $24,000.  What’s more for those studying medicine or law?  For sure, they accumulate even more debt.  And, the bad thing is, repaying these debts are even becoming more difficult for graduates in the midst of uncertain jobs and the recession.  

Now let us look at the things involved in student loan consolidation. 

Student Loan Consolidation: A Definition 

Student loan consolidation is typically defined as the process or the act of combining multiple loans into a single loan in order to decrease the monthly payment amount or elevate the repayment period.    There are a lot of reasons behind it, and among those is money saving payment incentives, decreased monthly payments, fixed interest rates, and new or renewed deferments. 

The Plus Factors of Consolidation     

Student loan consolidation has a lot to offer. That is what many experts often say.   To find out what consolidation has to offer, let’s read on. 

Overall Interest Savings     

Over time, the student loans you have borrowed have been assigned with different variable interest  rates.   Note that the key word here is variable.    While the loan you received may have offered, say, 3.5 percent at first, the rate will actually go up as the interest rates go up.   So, if you have two or more of these loans, there is a great possibility that you may have owed amounts at different rates, and these rates can rise and fall yearly.   Considering that the interest rates have nowhere else to go but up, it is no doubt a safe bet that the debt you have accumulated will mount faster than it would if you consider a student loan consolidation. 

By considering consolidation and remaining on your 10 years payment plan, it is possible that you can lock your interest at today’s current loan rates and save some bucks over the long haul.   Aside from that, all of those loans that may have come from different lending companies or banks can be a burden to deal with.   So, if you consolidate, it means that you only deal with one single company and one payment rather than several.  Other than that, you have the great chance to receive added bonuses like payment and interest rate reductions in case you pay your debts on time over a period of months.  These benefits are also possible to come if you have automatically withdrawn your monthly payment from a checking or savings account. 

Improved Credit Score     

By considering a loan consolidation, borrowers not only save or reduce their long term debt but can also help change their credit score for the better over time.   It is worth noting that an improved credit score is a very important factor when a person enters the “real” world and wants a new car, apartment or charge card.  

Here are some tips for you that can help you as you enter the job market. 

·         More Open Accounts, The Lower the Score:   Over the student borrower’s life, he or she may have borrowed up to eight separate loans to pay for school.  Each of these loans has a different payback amount, payment terms and interest rate.  The more accounts the student has opened, the lower the over credit score.   Thereby, lowering the amount of open credit lines on a credit report is needed, but this can only be made possible through a student loan consolidation in which the older accounts will be combined into a single account.   

·         The Lower the Payments, the Higher the Score:   When the credit report evaluation comes, it is usual in the process that the amount of the borrower’s monthly minimum payments is taken into account.   So, when you hold a number of loans, every payment is considered part of the borrower’s monthly payment obligation.   Those who have considered consolidation have only one payment to make, which is typically lower than the minimum amount of the separate, multiple loans.   

·         The Debt to Credit Ratio Matters:   As you may know, the credit bureaus typically find out if you are in debt.  They do this by way of evaluating the amount of your available credit you actually use.  So, in case you have a total of $10,000 available on three credit lines and you owe $2,000, your score will then be considered higher than especially if you have maxed out your on credit line with a $2,000 limit.   It is worthy to note that if a person has several loans with a maximum used, it will reflect negatively on his or her credit score.   Given this fact, consolidating the accounts is very important in order to lessen the number of open accounts being used.   

GOOGLE ADSENSE  

Returning to School is a Possibility     

Many students and graduates left school for family, career or financial reasons.  The odds here are they will want to return to college down the line.   However, if they fail to pay on their student loans while they are out of school, there is a great possibility that they can be kept from receiving any financial aid when they return.    So, if financial reasons were part of the primary reason they left school, it therefore implies that digging a much deeper hole will only make it harder for them to come back. 

By consolidating, the loans will also become easier to manage and pay off.  And, once the loans are consolidated, you can retain your right for forbearance as well as for deferment.   You can even take advantage of income sensitive and graduate repayment options which you may not have encountered before while you’re on your multiple loans. 

Hiding from Loans is Impossible     

There is one particular truth when it comes to student loans – you can’t hide from them.  It may sound extreme though, but school loans are completely immune to bankruptcy and those students or graduates that failed to pay their bills face stiff punishments.   The usual consequences are poor credit ratings, garnishment of wages, and IRS penalties. 

Besides, attaining licenses in certain fields is impossible when you failed to pay off your student loan debts.  There is even a chance that you may be excluded from some government contracts if you own a small business.   With all these consequences, it is then clear that avoiding a student loan is no way to start a life after college.    If you do come back and take out more and more student loans, you will be able to consolidate again after graduation. 

In the end, about half of the students coming out of college have actually gained their degrees.  Of course, it can be tough to remain and stay in school with financial burdens, and it is harder to come back.   But, thanks to student loan consolidation that creating one less barrier to coming back to school and keeping your credit rating clean is now possible. 

The Right Period to Consolidate     

In the government consolidation loan program, it is interesting to know that there are actually no deadlines connected to it.  It is supported by the fact that you can apply for the student loan anytime during the grace period or even on the repayment period.  But to consolidate student loans, some considerations must be paid attention.  To consolidate student loans, you should know that it usually take place during your grace period.  At this moment, the lower in-school interest rate will then be applied to estimate the weighted average fixed rate to consolidate student loans.  And once the grace period has ended on your government student loans, the higher in-repayment interest rate will be applied to estimate the weighted average fixed rate.  Given such process, it is then understandable that your fixed interest rate for government student loan consolidation will be higher if you consolidate student loans after your grace period.   

Seven Common Credit Myths Dispelled

(ARA) – With the economy reeling and home loan rates at a nine-month high, lenders are scrutinizing everyone’s credit history like never before. Yet, many Americans don’t realize the impact of late payments on their credit score and their finances.

In fact, mortgage loan delinquency reached a national average high of 3.23 percent for the first three months of 2008, according to Trend Data from TransUnion.

“Being knowledgeable about your credit standing is becoming increasingly more important by the day,” says Lucy Duni, vice president of TrueCredit.com. “Businesses, ranging from insurance companies to wireless providers and some employers, are now reviewing consumer credit information as a routine part of their application processes.”

When it comes to credit, knowing fact from fiction and understanding how to act is critical. Here are some common credit myths that may be preventing you from engaging in effective credit management:

Myth: My score will drop if I check my credit.

Fact: Checking your own reports and scores is considered a “soft inquiry” and has no negative impact on your credit score.

Myth: Reviewing any one of my three credit reports occasionally will tell me everything I need to know about my credit standing.

Fact: Occasional monitoring will give an incomplete snapshot of your credit standing. You should, instead, check all three of your credit reports and scores frequently throughout the year because the information and scores contained in each of those reports can vary at any given point in time.

Myth: There’s only one score that all lenders use to determine my credit-worthiness.

Fact: There are literally hundreds of different scoring models used by lenders in the marketplace today.

Myth: Closing old credit card accounts will clean up your credit reports.

Fact: Some people advocate closing old and inactive accounts as a way to manage their credit. In most cases, closing your older accounts will make your credit history appear shorter, which can negatively impact your overall credit standing.

Myth: Once you pay off a delinquent loan or credit card balance, the item is removed from your credit report.

Fact: Negative information such as late payments, collection accounts and bankruptcies will remain on your credit reports for up to seven years. Certain types of bankruptcies stick around for up to 10 years. Paying off the delinquent account won’t remove it from your credit report, but it will update the account to indicate it as “paid.”

Myth: If I don’t pay a medical bill on time because I believe it is incorrect, I can’t be held accountable.

Fact: If you fail to pay a medical bill in a timely manner, the delinquent payment may be reported as late to a credit bureau. If you believe a medical bill you have received is wrong or was sent to you in error, it’s best to contact the provider to resolve or discuss the matter prior to the bill becoming past due.

Myth: The “credit bureaus” report people as having either good or bad credit.

Fact: Credit reporting companies compile information that is provided directly and voluntarily by consumer lenders. If you have a credit card, home or auto loan, or make other monthly payments, details of your payment track record on these are likely being reported by those parties.

For more details about credit myths, visit TrueCredit.com.

Courtesy of ARAcontent