Private loan consolidation can be a very wise move. Whether you are seeking to combine private student loans or find yourself overextended and looking for payday loan consolidation, we’ll try to help out and steer you in the right direction.
Let’s begin with private student loan consolidation as that seems to be were the majority of the need arises. First be aware that private student loans cannot, in general be combined with federal student loans. Federal consolidation loans, with their very low interest rates do not extend to private educational loans. However, there are a number of options for those who seek the refinancing of private educational loans.
An important factor to be aware of is that most educational loans in the private sector do not compete on price or the interest rate. In most cases the real benefit of a private loan consolidation is simply having a single monthly payment… and since the term or length of the loan is reset, you may indeed wind up with a lower monthly payment. Do remember, however, that just because you are reducing your monthly payment, you may wind up actually increasing the total cost of the loan by extending the length of time it takes to pay off the total balance.
There may be good news however. The interests rate on most private student or educational loans is closely tied to your credit score. If your credit score has significantly improved since you took out your original loans there is a good chance that you could qualify for a better rate. If your score has not improved, it maybe worth your while to work on your credit score before you look at combining your loans.
Let’s say that you’ve graduated and now have a good job. You haven’t been burdening yourself with a lot of extra debt and your credit core has continually risen. At this point, if you are seeking private loan consolidation, you will very likely qualify for a much better rate. Even if you wind up not being able to consolidate, you should try to negotiate with your current loan holders to see if they will lower your rate rather than lose you to another lender. ( It doesn’t hurt to bluff a little in these negotiations as long as you keep everything truthful. Never lie, it could easily come back to bite you.)
Another option for consolidation, if you are fortunate enough to qualify, may be a home equity loan. Even if the interest rate of your private educational loans are not that much more than that of an equity loan. Trading a variable rate loan for a longer term fixed rate could be a huge advantage.
In general you should not consider consolidating your federal student loans with private loans. It is wise to keep them separate simply because federal consolidation loans have better benefits and lower interest rates when combining federal student loans.
Here is a short list of some of the better known educational lenders who will consider consolidation of private educational loans. Be aware that here the interest rates are set by the lender here, not the government. There may also be fees for originating the loans. Be sure to ask whether the interest rate is fixed or variable, what fees there may be, and if you want to pay off early, are there prepayment penalties?
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