When you consolidate private student loans, you’re essentially gathering all your private student loans into one loan.
This makes payments easier to track.
The only drawback is that you pay off more in interest for the duration of your new consolidated loan.
However, the ease of not having to worry about separate monthly payments may just be worth the extra charges.
Check out what else you’d need to watch out for before you sign with any loan consolidation companies.
Practical Advice to Consolidate Private Student Loans
1. Check Credit Score Requirement
You need to meet certain credit score requirements in order to proceed with student loan consolidation.
One of them is having a credit score of at least 640.
Loan payments made on or before their due dates helps bring up your credit score.
2. Understand What You’re Getting Into
You need to understand that you give up certain advantages when you refinance a federal loan into a private loan for consolidation.
Examples of these are the following: federal loan forgiveness programs, interest-free deferment on subsidized federal loans, and access to income-driven repayment plans.
In addition to these, you also need to note the additional interest you pay over the extended amount of time.
Although you are lowering your monthly payments, you technically pay a few more thousands of dollars throughout the lifespan of the loan.
3. Don’t Quit A High Paying Job
Lenders charge you lower interest rates if they see that you’re in a stable period.
Reliable income is a definite requirement for all lenders, and odds are they’d be more than willing to offer assistance when they see you doing financially well.
4. Gather Selected Loans
The common misconception about consolidating student loans is each and every loan should be consolidated into one singular loan.
That, however, shouldn’t be the case.
You are allowed to handpick the loans you want to consolidate.
Tip: Gather high-interest loans you’ve garnered on your portfolio. These are the ones you want to consolidate to make monthly fees easier to pay and keep up with.
5. Compare Offers
Some students get frazzled with all the payments they make in a month, they often sign off on the first consolidation offer they see.
In doing so, they’re stopping themselves from shopping for the best possible offer.
Remember your key purpose for consolidating and look at all the options available.
6. Consider a Cosigner
Adding a cosigner in your consolidation could help you land a lower interest rate.
This option is recommended if you have a parent or a family friend willing to help you out.
However, don’t get frustrated if they decline the offer.
After all, co-signing is risky as it puts the individual involved at a liability.
Finding a provider that offers a cosigner release after just 12 months is one way to work around this.
7. Wait Until the Loaner Starts Paying off the Loans
An agreement from a debt consolidation company isn’t enough.
Unless you are absolutely sure that the company has started paying off your loans, continue to pay off your initial monthly expenses.
This helps reduce any potential late penalties you’d have to shell out of your own pocket.
Find out more about how to consolidate private student loans by pressing play on the video below:
Here’s a last bit of advice before you say yes to consolidation: Don’t forget to consider the new loan period when you consolidate private student loans.
It’s definitely of great importance to have a clear idea of how much you should set aside every year to pay off your debts.
Do you have any experiences in consolidating private student loans? Tell us your stories in the comments below!