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Tuesday, September 22, 2009

Student Loan Consolidation - How Does It Work?

If you've been to college and ended up with a bunch of student loans, then you know how much of a burden they can be. Not just financially, either - just keeping track of your loans, and making sure you pay them on time, can take up a sizeable chunk of your time each month. That's where consolidating your student loans into one single loan can make life much easier.

The first step is to shop around and find the best deal. This will vary depending on your own circumstances, but there are plenty of companies that handle student loan consolidation, so it's worth checking a few out. Once you've chosen the loan that best suits your needs and has the best interest rate, you'll need to put in an application. Like all loan applications you'll need some basic information, such as identification, income details, assets, any other loans you currently have. So make sure you have all this information before sitting down to fill out the application.

Once your application has been approved, you will be sent details of your payment amount, and when it is due. Generally, the first payment will be due between 30 and 60 days after your loan commences. Make sure you continue to make your payments on time every month, so that you don't end up defaulting on the loan by accident. If there's any change to your payment or due date, the finance company will let you know.

There are a number of different types of repayments that you can make on your loan, so be sure you understand what type your loan has, so that you don't make an error in your payments. These repayment types include:

- Standard payment - you pay the same amount every month for a predetermined period of time

- Graduated payments - your payments rise slightly every month, to help pay off the loan quicker

- Variable payments - these change when interest rates change, or when your income or financial responsibilities change

- Extended payments - the length of the loan is extended, allowing you to make smaller loan payments for a longer period of time

Also be on the look out for companies that will charge you a fee to consolidate your student loans. Shop around, because there are plenty of other companies that don't charge hefty fees upfront and still offer good interest rates. Be aware, too, that the finance company will do a credit check on you. If you have a poor credit score, you will find it harder to get a really low interest rate, but with some research you should still be able to consolidate your student loans.

Some finance companies also give you a discount if you repay the student consolidation loan early, while others will charge you a fee. So if you think you will be paying out the loan early, make sure you check the fine print of the contract before you sign anything


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