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Why Student Debt Consolidation Loans are Better than Credit Cards?
With a federal loan, your interest rate will be around 5% and your payments will be usually
deferred until 6-9 months after graduation.
-With a private loan, the interest rate will be slightly higher than with a federal loan but
will still be lower than average. Moreover, you will only need to make interest
payments until after graduation.
-With a credit card, alternately, the interest rate can be typically as high as 21%.
Interest begins accruing almost immediately, and you need to begin paying off the bill the next month.
Federal Student Debt Consolidation Loans
The Federal Consolidation program takes all of your eligible Federal Student Loans
and combines them into one loan with a fixed interest rate and a lower monthly payment.
Typically the process starts after you send your signed and dated application
back to Federal Consolidation processing center, and they processing your loans.
They will send loan verification certificates to your
current loan holders to verify the current interest rate, status, and payoff amount on your loan.
After the loan holder sends back this information to student debt loan consolidation processing center and there are no
discrepancies,
your loan will be completed. Your new lender will send the payoff amount to your current loan holders and
those loans will be “paid off” and your new consolidation loan will begin.
This entire process takes typically between 3 to 5 weeks and you have to continue making
payments on your current loans until you receive your information packet in the mail.
Private Student Debt Consolidation Loans
Important
This is available for anyone with outstanding non-federal
education-related expenses who are either U.S. citizens or permanent residents.
The eligible student loan range is between $10,000 and $250,000.
Consolidation loans that exceed $40,000 have longer repayment periods—up to 25 years.
For loans less than $40,000, the repayment period is 20 years.
Private student loan consolidation is credit-based; so, if you consolidate
your federal loans first, you will be able to obtain a more
favorable interest rate in your Private Student Loan Consolidation
due to the improved credit score
Private Student Consolidation Loans can be used to consolidate all education-related debt,
including all private loans used for education-related expenses as well
as any federal student loans.
How student consolidetion debt loans influence your credit
Like any debt, student loans can influence your credit and your future decisions.
Students who borrowed more than $5000 for college
are less likely to pursue higher education. Moreover, student loan debt
that exceed 8% of your income can be seen negatively when your credit is evaluated
for future loans.
Two ways to reduce the debt burden are:
1) reducing or eliminating the principal balance by
specifying types of loans can sometimes be forgiven by service or other higher education
2) Reducing your monthly payment.
helps your credit evaluation because your debt burden is measured by comparing your loan payment to your income,
reducing your payment .
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