Consolidate Student Loans That Are In Default

Consolidation Options

When you find yourself buried in student loan debt, consolidation can seem like the last thing you want to do. After all, if your loans have been declared in default, then they’re essentially worthless; a collection agency will just take them away from you. But consolidating your loans doesn’t mean giving up any hope. There are still ways to get some relief from a mountain of debt.

What Is Debt Consolidation?

Debt consolidation is simply taking out a single monthly payment for all of your debts. You could reduce your interest rate, eliminate fees, or even combine several different types of debt into a single loan. If you consolidate your loans, you’ll pay less in interest over time, and you’ll be able to establish a budget that’s much easier to follow.

How Does Consolidation Work?

Most people who use a debt consolidation service will get a lower interest rate on their consolidated loan. Most lenders offer a fixed APR, which means that your payments won’t change no matter how high or low your balance fluctuates. Also, many services charge only one fee upfront, notifying you of everything that happens after the fact. This makes it much simpler to keep track of what you owe. And since you’ve already paid off one lender, paying off the rest becomes much easier.

Should I Do It?

The answer really depends on your situation. If you’re finding it hard to make ends meet because you don’t have enough income coming in each month, then consolidating your loans may be worth considering. However, if you’re already working full-time at a steady job and your bills aren’t too high yet, then you shouldn’t rush into anything. Instead, look for a flexible repayment plan that fits your unique financial situation.

When Can I Use My Consolidated Loan?

Once you decide that you want to consolidate your loans, you should check with your creditors to make sure the terms of the agreement work for you. A loan consolidator might help negotiate lower rates or additional perks, like lower fees or extended warranty coverage. However, be aware that if you miss a payment while you’re waiting for the consolidation to go through, you could lose access to the services.

What Kind Of Service Do I Need?

There are two basic kinds of loan consolidation: online and offline. An online service connects you with a company that specializes in dealing with the paperwork for you, and they handle the entire process. This kind of service generally requires a higher fee than an offline service, but it’s much faster and convenient. Offline services tend to require a lot of paper work themselves, but they typically offer lower interest rates.

How Much Will It Cost Me To Consolidate My Loans?

If you choose to go with an online service, you may end up paying a flat fee, which covers the whole process. As for offline providers, you’ll likely have to pay an application fee, along with a portion of the total amount you need to borrow. The remainder will depend on the size of your outstanding balances.

Consolidate Student Loans That Are In Default

Consolidate Student Loans

Pay Off Highest Balance First

Make Payments Only When You Can Afford To Do So

Consider Refinancing Your Loan

Consider Using A Debt Management Plan

Consolidating student loans involves taking different federal student loans out into one loan. You may have many student loans at once; for example, two private student loans plus a government-issued loan. This could mean you have six monthly payments instead of twelve. You’ll pay less interest if you consolidate your debt.

As a general rule, you should consolidate student loans only if you plan to stay enrolled full time or graduate soon. Consolidation affects how much debt you have when you start repaying. If you’re still working while paying off your consolidated loans, you might not need to make the minimum payment on those loans. However, when you stop making payments, consolidation is no longer an option.

You’ll want to consider paying off your highest balance first. Let’s say you owe $15,000 on your student loans. If you paid off the smaller amounts first, you would pay $150 per month toward just your largest loan. But if you pay off the smallest loan first, you might end up paying over $500 per month.

If you’re planning to drop out, it’s best to use payments to lower balances rather than increase them. For instance, if you were going to school full time, you could cut down each month’s payment slightly – about 25 cents per week. Or, if you’re graduating within two years, you could take a break from payments altogether.

Payments aren’t due until the end of the grace period. Since you won’t be able to afford to pay off your loans right away, they often give you a few months before any late fees begin to accrue. The federal government gives students three years after graduation to repay their loans without penalty. After that, your loans become delinquent and you could be charged penalties and interest.

If your financial situation changes between now and then, you might be able to refinance your student loans. Many lenders offer lower rates than the ones you currently have on your loans. And if you’re eligible for refinancing, you may save money in interest charges.

Try to pay off your student loans regularly. If you skip a payment, your lender may report missing payments to credit bureaus. This hurts your credit score, which will affect what interest rate you qualify for when you refinance later.

One thing to keep in mind: if you default, you don’t always lose your federal student loans. The Department of Education offers alternative repayment plans and forbearance options. These allow you to avoid defaulting on your loans by postponing payments. There’s no guarantee that you’ll get the same terms when you apply again, though.

Consolidate Student Loans That Are In Default

Consolidation

You’re going to want to consolidate your student loans. When you don’t do it now, you’ll have to pay high fees later, and even if you do it later, you’ll just end up paying for interest again. The best way to get out of debt is to consolidate. You can use consolidation to lower your monthly payments, increase your credit score, and save money.

Fees

Most banks charge about $15 per month for loan consolidation. A lot of them will waive that fee if you’ve got at least six months left before you’d need to start making payments. Make sure you read their fine print first, though, because many lenders won’t let you make any changes without waiving your fees.

Credit Score

When you consolidate your loans, you’ll likely get a credit card with a higher limit. Your credit score will go down, though, since you have fewer open accounts on your report. If you already have trouble getting approved for credit cards anyway, you might not be able to take advantage of this benefit. If you have good credit, though, it’s worth doing – especially if you’re looking to refinance your current loans.

Savings

If you pay off your loans early, you’ll save around $50-$75 a month. Even if you pay your minimum payment each month, you’ll still save money. If you put that extra cash toward anything else, you could really rack up some savings. Save the money you would’ve spent on late fees and then use it to invest or take a vacation!

Consolidate Student Loans That Are In Default

Consolidation options

You have a few different options for consolidating student loans if they are in default:

If your original loan was issued under the William D. Ford Federal Direct Loan Program (Direct Loan), then you can consolidate into one monthly payment using the William D. Ford Consolidation Program. You will need to send them a letter or fill out their online application and request a consolidation quote.

If your student loans were issued under the federal Perkins Loan Program, then you can consolidate into a single payment with Fannie Mae’s Pay As You Earn (PAYE) program. Check to make sure you are enrolled in PAYE before requesting a consolidation quote. You may also be eligible to apply for income-based repayment. c) If your school was funded by the federal Stafford Loan Program, then you should contact your lender directly to see what your options are. Your lender will determine whether you qualify for refinancing under the Income Contingent Repayment Plan. d) You may be able to refinance your existing student debt if you are unemployed, working a minimum wage job, or actively looking for work. Call your bank or credit union and ask them to review your situation. Many lenders offer low interest rates, flexible terms, and no prepayment penalties. To learn more about how to refinance, visit this link: www.bankrate.com/brm/refi-rates.aspx.

Refinance your debt

If you’re not currently making payments toward your loan, consider refinancing your debt to lower your rate. You’ll want to start calling banks at once. Once you’ve identified which lender would best fit your financial profile, call them back and begin discussing your options. Make sure you understand the fees associated with each type of mortgage.

Lower your rate

Once you’ve decided on a lender, compare several companies to get a good sense of the different types of rates they offer. Look for lenders who offer competitive rates and flexible terms, and that won’t charge high closing costs. Finally, shop around—choosing a lender shouldn’t cost you much money, but don’t expect to save hundreds of dollars.

Don’t pay late

As long as you keep making timely payments, you might be able to avoid default status altogether. However, failing to make any payment could lead to higher interest rates and even worse credit scores.

Avoid default status

In order to protect yourself from default status, look for ways to reduce your overall balance. Try paying off small amounts each month rather than larger ones. Consider taking advantage of an automatic bill pay feature offered by your bank or credit union.

Consolidate Student Loans That Are In Default

Find out how much money you owe

Payday loans, student loans, credit cards – whatever type of loan you have, it’s time to consolidate them and get rid of the interest rates that keep adding up.

Consolidate

If you’re in default already, it may be harder to track down the consolidation companies, but if not, do some research. You’ll want to find a company that specializes in refinancing bad debt and then consolidating these types of loans. There are many different options available to borrowers who need extra help paying back their debts, including federal programs and private lenders.

Apply

Once you’ve decided what kind of loan consolidation you’d like to pursue, it’s time to apply! The application should be fairly straightforward, but double-check everything before submitting it. If you don’t provide sufficient information regarding your employment situation, income, assets, and so forth, they won’t be able to make sure you qualify for any loan program.

Make payments

Now that you’ve consolidated your loans, it’s time to start making payments again. Don’t forget to pay off anything outstanding, even if you don’t have plans to use the funds right away. You might be tempted to skip a payment or two, just because you know you have a lot of work to complete over the next few months. But remember, you’re going to need those funds to pay down your balance.

Do your homework

You’ll want to make sure you choose a lender wisely. Many people think that choosing the first loan company they speak to is always best, but doing a little bit of research can reveal a wealth of information about each loan provider. Review each lender’s website carefully, and look at reviews of their services online. A good place to start is Google. Type in the name of the provider along with any relevant keywords. See what comes up. You should be able to read reviews about the service, browse customer testimonials, and learn about repayment options. If possible, try contacting someone via social media and ask questions. Most providers are happy to answer any questions you have.

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