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College Loan Consolidation
Consolidation of loans from college has the
potential to save you a great deal of money,
by taking a number of outstanding federal loans
and replacing them with a single federal consolidation
loan, which is often at a lower rate of interest.
This approach will not only save you money by
reducing the interest that you will pay on the
loan amount, but should also make your finances
easier to manage by only having the single repayment
to meet each month.
The interest rate for a consolidation loan
is the weighted average of the interest rates
on the loans being consolidated, rounded up
to the nearest one-eighth of one percent. It
is this aspect of student loan consolidation
loans that can lead to savings for you, for
if you have two loans and one is for a small
amount with a low rate of interest and another
for a larger amount and a higher interest rate,
the averaging will in effect lower the amount
you pay on the greater sum, whilst you will
only loose out a small amount on the higher
rate for the smaller amount.
As an example, if you were to have two loans
as shown below:
Loan 1: $1,000 @ 2.4%
Loan 2: $3,500 @ 3.8%
The averaging would mean you would be paying
approximately 3.1% interest on the total amount
– 0.7% less on the larger amount and as
0.7% of $3,500 is more than the same percentage
of $1,000 you are making a saving on the amount
you will repay.
If the situation was reversed, with the lower
interest rate being on the greater amount owed,
you would need look into the details of the
interest rate offered on the consolidation loan
to see if you would be making a saving overall.
Saving on the interest rates is not the only
reason for opting for student loan consolidation,
extending the term over which the loan is to
be repaid is another incentive for consolidation.
By arranging to repay the loan over a greater
timescale you can reduce the amount that you
pay out each month, this can be helpful when
you have recently graduated and may not have
the monthly income necessary to cover the loan
repayments along with other bills and expenses.
In order to get the most favourable rates,
you will need to consolidate your federal student
loans within the grace period that you are given
after graduating – acting quickly to sort
out your finances can lead to you making greater
savings. For a list of the best people to help
you to consolidate your student loans, see the
sponsored links at the top of this page for
companies offering loans for college.
Many students will leave college not only with
a qualification and good memories of their time
there, but also with a large amount of debt
- loan consolidation can help you to pay off
these debts quicker and save you money in the
process. Following your graduation you’ll
probably have many things that you want to do,
firstly celebrating and then you will likely
turn your attentions to finding employment,
but don’t neglect to pay attention to
your finances or you may find that you end up
paying more than you need to.
If you are looking for a loan then we recommend that
you visit Loans UK.
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