Consolidating Your Student Loans- Questions to Ask
Some Answers for common Questions Regarding Student Loan Consolidation
If I consolidate my student loans together, how low can I expect my monthly payments to go?
This is a great question and the answer can vary of course, depending on the finer details of your particular loan and how your lender does it. One student lending site said gives out loans across the U.S. said that the reduced amount can be up to 54 percent!
While this sounds wonderful initially, keep in mind that up front savings can mean longer term paying to your lender. You incur additional finance charges in the long run due to longer repayment periods. This makes sense, but may not be thought through completely before you jump right in to student loan consolidation. What appears and is actually benefiting you initially, isn't really just benefiting you but the lender. You actually pay more just over a longer period. Knowing these details can be worked into your favor though as you go about paying off.
What about Interest Rates and any fees?
What Will the Interest Rate be on my new consolidated loan?
The answer to this question depends on some key factors as well. For instance, your new rate of interest will depend partly on your current rates of interest for your loans. The new interest rate is actually a weighted average (usually) of all your current rates of interest that you have. They take that weighted average and round it up to the next 1/8 of one percent. Federal law states that these loans have lifetime cap of 8.25 percent.
Are there any fees for consolidating my student loans?
There is good news here! There are no fees for consolidating your federal student loans. Consolidating your loans is free, and there aren't even any application fees and no prepayment penalties which is a relief to many.
How can I get the best deal on my consolidated Student Loan?
Every lender that consolidates federal student loans is using the same basic interest rate. Therefore, you are looking for a lender that may offer additional perks or that has exceptional service. Do you have a favorite bank or lender that has done great business over the years for you and your family? Why not consider using them? Some may offer perks such as possible interest rate reductions should you be really good about paying monthly payments for say one or two years. You might ask if there are other possible perks, like what if you use an automatic debit system? Some places have been known to lower the rates if you do automatic debiting for your payments.