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Tuesday, September 22, 2009

Consolidate Your Federal Government Student Loans

Consolidate Your Federal Government Student Loans

The idea of consolidating your federal government student loans is to take all your separate loans and consolidate them into one easy to manage loan. There are a number of reasons why you would do this, so let's take a look at them.

The problem with having federal student loans is that you also have multiple repayment dates and amounts each month. Apart from being really confusing, this can also add up to quite a large repayment amount overall. If you shop around, chances are you can get a better deal on the interest rate and save yourself some money. So your student debt becomes a lot easier to manage, and when you're starting out in the workforce, that's very helpful.

Also, by consolidating your federal student loans into one single loan, you only have to remember one payment date and amount every month. This is a lot simpler than managing multiple loans. After all, who wants to spend time every weekend keeping up with loan payments? One payment a month is a lot less hassle.

If you shop around before choosing your student consolidation loan, you might also be able to take advantage of other loan features. These include things like flexible repayment dates, an extended loan period or a cheaper interest rate. You can save yourself a substantial amount by finding a consolidation loan with these special features.

Remember, too, that by consolidating your student loans it appears on your credit history as you having paid them out early. So that gives your credit score a boost. It may not matter now, but down the track if you want to buy a home, a good credit score is very important. It makes it easier for your loan application to be accepted, and you qualify for much better interest rates. On a mortgage, a better interest rate can save you thousands, if not tens of thousands of dollars in interest payments.

Also, when applying for a mortgage, the lender will take a look at your current income and also any regular monthly debt payments. Many work with a rule of thumb that says if more than 8% of your income is used to pay student loan debt, you won't be eligible for a mortgage. Reducing your monthly payments by consolidating your student loans makes it easier to qualify for a mortgage.

So basically, when you consolidate your federal government student loans, you lower your monthly payments, simplify your life because you only have to remember one payment amount and date each month, you can quality for a lower interest rate and improve your credit score. So consolidating your student loans is a very smart financial step to take.

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