Consolidation Student Loans Rates

6 min read

Consolidation student loans rates go down throughout 2019, making them easier to pay off. The lowest rate currently is 6.41 percent, according to Bankrate.com. That’s about $13 less per month than what the average borrower was paying last year, according to Federal Reserve data released earlier this week.

But don’t expect to pay off those loans in six months. A typical consolidation loan requires borrowers to pay back at least 25 percent of their original balance each month until the loans are paid off. And the interest doesn’t stop accruing once the debt is repaid — it continues to add to the principal. As long as borrowers continue to make monthly payments, they’ll never eliminate their debts.

Borrowers who consolidate aren’t necessarily saving money. If you have high-interest private student loans, borrowing through a federal program could actually cost you more over time if you take out a longer term. (You’d only get one payment instead of nine.) That means you’re paying more in interest and possibly fees.

There are some downsides to consolidating. Because it often takes years to clear out your student loans, you may not qualify for a variety of financial aid programs. And you might lose any tax deductions you had under the old loans. Also, you need to be careful about closing accounts linked to your old loans. You may be able to avoid having to open a new credit card after borrowing through a government program.

Here’s how to figure out whether it makes sense:

Consider refinancing your existing student loans. That way, you wouldn’t have to start paying immediately.

Figure out where you would use that extra cash. Paying off your debt should free you to do something else with your money.

Think about how much you owe in total. You want to make sure you can afford to pay back your debt without dipping into savings or maxing out your credit cards.

Be aware of hidden costs.

For example, many companies give customers the option of paying their bills automatically. Do you really want to set yourself up for monthly bill shock?

One final thing to consider: If you decide to borrow through a federal program, you still need to apply to the Department of Education to receive your federal student aid. So even if you think you’ve got the best interest rate, you still need to fill out a bunch of paperwork before you get approved.

Consolidation Student Loans Rates

Consolidation student loans rates vary based, on several factors, including how long you’ve had them, whether they are secured or unsecured, what type of loan you have (fixed-rate vs. variable), and where you live. If you want to consolidate, start by looking at interest rates and fees associated with current loans. You should also make sure you know how much money you need to pay off each month, how much you owe, and how long it will take to get out of debt. Then look at the pros and cons of different consolidation options. Don’t forget to consider any penalties or late charges.

In order to figure out how long it would take to pay off your student loans, determine your monthly payment amount. Include all costs related to your loan, such as payments, interest, and any fees you have to pay. Divide the total cost by the number of months left until you plan to pay off the loan. To find the average percentage increase per year, multiply the percent change per year by 12.

Look at what types of loans you currently have. If you have federal student loans, you may qualify for income-based repayment. Income-based repayment provides for lower monthly payments, depending on your household income. While you are still repaying your loan, you pay a set dollar amount each month rather than paying a set percentage of your monthly income. Also, if you are not able to pay back your loan, you will not accrue additional interest.

How many years do you have left before you plan to repay your student loan? Take a step back and calculate the total amount of money you will need to spend on your loan. Add everything together, then subtract your estimated gross annual salary. Your remaining balance is what you owe after all loans are paid.

There are two primary options for consolidating your student loans: fixed-rate and variable. Fixed-rate loans offer a fixed rate throughout the term of the loan; while variable-rate loans carry a variable interest rate over the life of the loan. Variable-rate loans usually yield higher rates compared to fixed-rate loans. However, those who choose a variable rate might save a little bit of money in the beginning since their interest rates may decrease slightly.

Once you have determined your monthly payment amounts, add those amounts up to see if you can afford to make the payments. If you cannot afford to make a single payment, think about increasing your monthly budget or taking out a low-interest loan. If you feel confident that you can handle the increased monthly payment, then go ahead and enroll in an income-based repayment program. Most private companies offer these plans, though some only offer Federal Stafford loans.

Before you decide on a specific option, ask yourself if you are willing to work with the company. Do they charge extra fees? Are there hidden fees? What happens if something goes wrong? And, are you comfortable making extra payments? These questions can help you determine if the benefits outweigh the potential liabilities.

After you compare the different programs, select the option that makes financial sense for you. Then call your lender to finalize your decision. If you decide to consolidate, make sure you understand your repayment terms. Even though you may get a lower initial percentage, you could end up owing more over time without knowing the details.

Remember: Consolidating your student loans is a good way to reduce your outstanding debt, improve future earnings, and ensure you don’t pay any unnecessary interest. But remember to compare the options carefully before choosing one. And if you aren’t completely satisfied with the choice you’ve made, you can always switch later!

Consolidation Student Loans Rates

Private student loans

These types of loans do not have any restrictions when it comes to their interest rates. However, they tend to have higher rates than federal loan programs since they are only offered by private lenders. The interest rate for these loans can vary from lender to lender and range anywhere from 5% to 10%. The total amount that some students end up paying over time can add up to thousands of dollars, making them difficult to pay off. Many people who take out private loans often find themselves in default after college because they are unable to afford payments.

Federal student loans

Federal student loans, commonly known as FSLACS, generally offer lower interest rates than private loans. It is possible to get federal loans without having to borrow money from friends or family. In addition, most banks and credit unions will lend to individuals who need financial assistance. Depending on the type of loan, interest rates can be as low as 2%, although that may vary based on income levels.

Government student loans

The government offers many different kinds of grants to help cover tuition costs. These grants are awarded based on financial need, rather than merit. Grants offered by the government include Pell Grants and Direct Loans. A student who receives a direct loan could receive a subsidized rate if he or she qualifies financially.

Payday loans

Payday loans are unsecured loans that work by providing borrowers with cash advances until their next paycheck. Borrowers typically use the money that they obtained for emergencies like car repairs or medical bills. Interest rates and fees may apply.

Consolidation Student Loans Rates

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Consolidation Student Loans Rates

You have $50,000 worth of student loans to pay off and decide to consolidate them. You do some research on consolidation rates and find out that you can get a rate around 2.8%. If you end up paying 10% interest per year, how long would it take to pay off those student loans?

The answer is about 16 years!

If you only paid 1.5% instead of 10%, then it would only take 9 years to pay off the loan.

To be fair, we are using 5% interest rates for simplicity’s sake. In reality if you were applying for consolidation, you’d likely qualify for a lower rate than what was listed above.

Your monthly payment after consolidation would look something like this:

Payment | Interest Rate | Total Payment

$100 | | $500

$200 | | $600

$300 | | 500

Total Amount Payable | 0.15 + 0.15 + 0 1.30 (Interest Paid)

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