Private Student Loan Consolidations
Understanding private student loan consolidations
Private student loan consolidations are ideal for students and families who require educational funding that exceeds the amount allowed under the US federal loan programs. The drawback to these types of loans is that the government does not back or guarantee them, and the interest rates will not be subsidized. Eligibility for these types of loans may also be affected by credit history, unlike standard consolidation loans where lenders do not require a credit check. These are Unsecured Loans that usually offer low-interest rates and flexible repayment options. Private student loan consolidations are an attractive alternative to standard Stafford Loans or Perkins Loans which may not meet the student's financial needs. Additionally, they offer a superior option over high-interest credit cards or home equity loans.
Interest rates on these types of loans are set by the lending institution where the money is being borrowed from. The difficulty for many lenders is that students are often lacking in a solid credit history, which will result in a large variance of interest rates from the lending institutions.
Qualifications for private student loan consolidations
Although qualification will vary across banks and lending institutions, there are several qualifications that will need to be met before you'll be able to receive a private student loan consolidation.
US citizenship required
This is a requirement across all lenders. You or your co-borrower must be a citizen or permanent resident of the United States. Failure to meet this requirement will result in immediate rejection of your application.
You must meet the age of majority in your state
The age of majority is the age in which a person is recognized by law as being an adult and legally responsible for his or her own actions. The age of majority varies from states to state and ranges from 17 to 21, but the most common is 18.
You must be able to show at least two years of credit history
Lenders are cautious when it comes to loaning out money, especially with private student consolidation loans. Almost all lenders will require you to have a solid record of at least two years of credit history. If you cannot meet this requirement you'll need to have a co-borrower sign for you.
No prior default on student loans
Lenders look at your credit history as the key factor in providing your loan. If you've defaulted on a prior student loan you've shown the propensity to not pay your debts, thus you will not qualify for a private student consolidation loan. Rule of thumb is to NEVER default on your loans. It sets up a bleak future if you do.
No bankruptcies have been filed for at least 7 years
If you or your co-borrower has filed for bankruptcy in the past 7 years, the likelihood of securing a private loan is diminished greatly. You'll be hard-pressed to find any legitimate lending institution that will provide the loan. Sometimes bankruptcy is unavoidable, but in many instances, it can be avoided! Remember, bankruptcy WILL hurt your credit and ability to apply for loans the up to 7 years from the date you file. Understand the consequences associated with bankruptcy before going through with it.
Total balance of loans must exceed $5,0000 to be eligible
To be eligible for a private student loan consolidation, your TOTAL combined outstanding loans must equal or exceed the $5,000 minimum. Note that it is not for each loan, but the combined value of all your loans. If you have already been paying your student loans and are in the process of researching a consolidation, ensure you do know fall below the $5,000 minimum balance if you wish to be considered for eligibility.
You must be in your grace period of the repayment period
In order to qualify, you cannot still be in a full-time student position. You need to be in either your grace period or repayment period before you can become eligible for a private student loan consolidation.
Although the above rules may seem restrictive, they're really not. They're designed to protect the banks and lenders from the risk of loan delinquencies and defaults. If you meet the above minimum requirements and want to ease your monthly loan liability, you should consider signing up for a private student loan consolidation today!
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2019 Jason Nicolosi
