Student Loan Consolidation Rate in Federal and Private Consolidation

Student Loan Consolidation Rate in Federal and Private Consolidation

dept consolidation, department consolidation, department education consolidation, loan consolidation department, dept consolidation loanStudents and their parents can use student loan consolidation that will allow them combine their education loans into one loan from a single lender. That new loan - consolidation loan - will be then used to pay off the balances of the originating loans.

The process of consolidating student loans is similar to refinancing a mortgage. It's a great way to improve own finances as it gives the borrower a number of benefits, such as: lower monthly payment, lower interest rate, longer repayment schedule, lack of application fees and of credit check as well as deferment and forbearance options.

While both federal and private consolidations provide similar results with regards to lowering monthly payments and longer repayment schedules, there are significant differences regarding the interest rates and deferment and forbearance options.

In this article I will discuss the issue of the student loan consolidation rate and how it is determined in federal and private consolidation.

In most cases, they don't come with private student consolidation loans.

The higher the interest rate, the longer the total cost of taking the loan will be. Also, getting a fixed interest rate is preferable to a variable rate, as it is just much easier to live with the fixed rate and not to worry that it may significantly go up and negatively impact your financial well being.

Many people believe that all student loan consolidations - both federal and private - result in a fixed-interest rate loan. However, it's only true for the federal student loan consolidations, but in most cases the private consolidations don't feature fixed interest rates. Because the private consolidation loans belong to the consumer loans, they are credit-based and have to carry variable interest rates.

Some of them are also directly provided by the ED; they are called "Direct Loans". That formula is simple - the fixed interest rate on a federal student consolidation loan is calculated as the weighted average of the interest rates on all loans that get consolidated. The fixed interest rate means that it is locked in for the whole term of the consolidated loan; it makes the life of the borrower much less stressful than that of somebody that has to take a private consolidation loan.

The second one has been significantly lower over the last few years, thus it's more advantageous for the borrowers. The lenders arrive at the final interest rate by adding a margin determined by the borrower's credit rating.

There are a few ways available to the borrowers to bring down the consolidation loan interest rate and they are available in both federal and private consolidations.

Any interest rate reduction will usually mean thousands of dollars in savings, so try as much as you can to use all opportunities to earn those reductions and save a lot of money.

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