Consolidation Student Loans

Today’s video we’re going over consolidation student loans!

Hey guys! Great day! So today I’m talking about student loan consolidation. Before I get started, let me just say, I don’t have any affiliation with any of these pla…

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This video explains how to consolidate your debts.

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Consolidation Student Loans

Author: “Randy Gage”

Date: 6/25/17

I have always been intrigued with the idea of doing my own loans consolidation online, but I was unsure how much money would really be saved if I did it myself. After reading about it on their website though, I decided to give it a try. I think it’s pretty awesome! I am able to get rid of $15,000 in student loan debt which is great, especially since I just started college. My payment plan is set up monthly, which makes it even easier for me to stay on top of things. I actually already have an account set up and logged in to start consolidating. Now I just have to wait till August 30th. I’m excited to start making some savings with these student loans and hopefully have something left over at the end of the year!

Consolidation Student Loans

What Is Consolidation?

A consolidation loan is a type of student loan where the borrower pays one monthly payment rather than several. Lenders use these loans to help people pay off their existing student loans faster and without additional fees. There are different types of consolidation loans out there, including fixed-rate consolidation, variable-rate consolidation, income-driven repayment plan (IDR), and principal reduction. Each offers borrowers a slightly different set of perks.

Types of Consolidation Loans

There are many types of consolidation loans, some of the major ones being:

Fixed rate: A fixed-rate consolidation loan is a loan that charges a fixed interest rate throughout its term. These loans are great if you know that you won’t have any changes to your payments. If rates do go up, then your payments could increase accordingly.

Variable Rate: Variable rate consolidation loans charge changing interest rates based on the market. However, they don’t necessarily change at set intervals like a fixed rate does. Instead, they change depending on how expensive the borrowing gets relative to other lenders. This means that your payments may not always stay the same.

Income Driven Repayment (IDR): An IDR program allows borrowers to make smaller payments over time instead of larger payments all at once. As interest accrues, the amount owed decreases. Borrowers who choose this option generally want to minimize total debt payments.

Principal Reduction: A principal reduction consolidates all of a person’s outstanding federal student loans into a single loan. This means that the balance of the loan is paid down. When a borrower takes advantage of a principal reduction, it is possible to lower the amount owed by hundreds of thousands of dollars per year. This is great for those who aren’t sure about college financing.

Pay As You Earn (PAYE): PAYE is a voluntary repayment program. Under this plan, borrowers make biweekly payments toward their consolidated loan each month. Payments are adjusted according to a borrower’s income. This program allows students to keep their existing payment plans while minimizing their debt. In return, borrowers may miss a few payments here and there. Because of this, the program isn’t recommended for first-time borrowers.

Benefits of Consolidation

The biggest benefit of getting a consolidation loan is that you only need to make one monthly payment per month. This saves money and eliminates late fees. Another big perk is that you don’t incur additional fees when taking out a consolidation loan. In fact, many companies offer no upfront fees. That said, it’s still a good idea to shop around before signing paperwork. You should compare rates and find the best deal for your circumstances.

Consolidation Student Loans

Consolidation student loans – are they really worth it?

A consolidation loan is essentially a single installment loan where all your current and past due balances get put together and added onto a single loan term. This means you pay off a smaller amount over a longer duration than if you were paying the same amount each month. There are some pros and cons of consolidating loans. The biggest pro is not having a bunch of different payments and interest rates to manage. A drawback is that sometimes it’s harder to know what your payment will be until after you’ve signed the contract, especially if you’re looking at private lenders.

How should I consolidate my student loans?

There are basically two types of consolidation loans. Fixed rate and adjustable rate. Adjustable rate loans have much higher interest rates and require you to start making minimum payments before you have any idea how high or low the monthly payments will actually be. If you don’t make enough money to cover those minimum payments, then your interest rates will increase. You’ll want to stick with fixed rate loans unless you know you’ll be able to consistently make the minimum payments.

What happens if I miss a payment on my consolidation loan?

Lenders won’t suspend your payments automatically, but you will lose credit score points and incur late fees.

When does my consolidation loan become active?

Your consolidation loan becomes active once you sign the final papers and the lender sends them out to processing. Once processed, lenders may ask you to provide proof of income. In order to qualify for the lower interest rate on the consolidation loan, you need to demonstrate that you earn above the median household income for your area.

Do I need to complete my repayment plan?

You generally have between 5-10 years to repay your consolidation loan (depending on when you took it out). However, completion time varies based on whether you have missed any payments, how many you have missed, your total balance, etc.

Consolidation Student Loans

Consolidation

A consolidation loan is a type of student loan where you combine all your loans under one loan. You will have a lower interest rate if you consolidate. However, it may take time to save money by consolidating.

If you’re going to have a lot of debt, you should start thinking about consolidating now since you’ll have less interest payments over time.

Income Based Repayment (IBR)

IBR is an income based repayment. Your monthly payment will depend on how much you make.

You will be responsible for paying back 10% of your discretionary income, and then the extra goes towards principal.

This means your minimum payment will increase each year, but the total amount you pay back will decrease.

When the term ends, you will still have to pay the remaining balance back, and will not get any breaks on the remaining balance.

This program does help those who need financial assistance.

Pay As You Earn (PAYE)

PAYE is a plan where you don’t pay anything while you are employed. Once you quit working, you’ll begin making monthly payments.

PAYE plans are generally recommended for people who have great credit scores and want to build their credit rating.

Graduated Payment Plan (GPP)

GPP is a graduated repayment program where you make smaller monthly payments until you’ve paid off the whole loan.

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