Fundamentals Of Debt Consolidation Loans
If you’re drowning in debt, you are definitely not alone. Millions of people around the world are having a hard time making their monthly payment obligations. Although some choose bankruptcy as a means of squashing debt, others are turning to lower interest rate or fixed interest rate debt consolidation loans to dig them out of the debt hole.
When you secure a debt consolidation loan, you basically combine all of your outstanding loans into one loan and then use that money to pay off your other obligations. Debt consolidation loans can be secured or unsecured. With a secured loan, you are required to put up an asset (like your home) as collateral. Then, if you ever default on the loan, you give the loan company permission to take back the asset to meet your loan obligation. In contrast, with an unsecured loan, you don’t offer any assets as collateral. The main difference between secured and unsecured loans is that secured loans have lower interest rates and more favorable terms because they are less risky to lenders.
The main benefit of debt consolidation loans is that they give you peace of mind and allow your payments to work harder for you. Consider this; if you have ten credit cards with various interest rates averaging about 28%, and you’re able to secure a debt consolidation loan for 15%, you’ll save more than 13% by consolidating. Now, that’s a serious savings!
When searching for a debt consolidation loan however, you have many options including local banks or credit unions, companies that send out mass mailers advertising and on line firms. The key to finding the best debt consolidation company is to carefully evaluate prospective companies before signing on the dotted line.
Here are some tips to help you find a great debt consolidation loan:
1. Beware of bad lenders. Not every debt consolidation company is legitimate. Some companies (predatory lenders) attempt to take advantage of consumers by charging extremely high fees for debt consolidation loans. Sometimes these lenders’ fees are so extreme that they resemble state maximum mortgage fees. Instead of choosing a company like this, seek out reputable companies that have a sound reputation, offer fair rates and aren’t fly-by-night firms. Make sure they don’t have any complaints with the Better Business Bureau and that they offer some safeguards for borrowers.
2. Ask for discounts or better terms. Many debt consolidation companies may be able to discount your loan. Always ask for lower interest rates and be willing to shop around for the best deal. By doing this, you’ll save yourself a ton of money.
3. Evaluate your options. Although debt consolidation loans can work great, you have to make sure that the interest you pay is worth it. That is, if you can secure a better deal by simply negotiating with your creditors, then that would be your best bet. They key is to evaluate your options carefully and do what is best for you and your individualized circumstances.
4. Read and understand your loan terms. Always read your terms to make sure that you understand your loan obligations. For instance, is the offered interest rate better than the ones that you previously pay? What are the payment terms? Do you have a locked or fixed rate? Will you be penalized for paying it off early? Understand the answers to these questions before you commit yourself to this particular company.
In conclusion, debt consolidation can be a wonderful option for those who are suffering financial hardship. However, you can’t just choose the first debt consolidation company that comes your way. Instead, you have to evaluate your options, do your homework, and read and understand your loan terms. Once you do, you may find that debt consolidation is an effective way to eliminate debt and relieve financial stress.
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wow – a lot of questions. let's start with the easy ones, first.
Student loan interest IS tax-deductible. The maximum amount you can claim each year is $2500. If you paid more than that, you can not deduct anything over $2500.
(Can I assume that your starting salary won't be in excess of $55,000? If you do make more than $55,000, you won't be able to take the full deduction for student loan interest.)
Do you have to be employed full-time in order to consolidate? No.
Should you consolidate your students loans? Ah, now that's the tough one.
Here's what the Department of Education has to say about consolidation loans:
Always Consider the Cost
"You should keep in mind that although consolidation can simplify loan repayment and lower your monthly payment, it also can significantly increase the total cost of repaying your loans. Consolidation offers lower monthly payments by giving borrowers up to 30 years to repay their loans. So, you'll make more payments and pay more in interest. In fact, in some situations consolidation can double your total interest expense. If you don't need monthly payment relief, you should compare the cost of repaying your unconsolidated loans against the cost of repaying a consolidation loan. You also should take into account the impact of losing any borrower benefits offered under non-consolidated repayment plans. Borrower benefits, which may include interest rate discounts, principal rebates, or some loan cancellation benefits can significantly reduce the cost of repaying your loans.
Once made, Federal Consolidation Loans cannot be unmade. That's because the loans that were consolidated have been paid off and no longer exist. Take the time to study your consolidation options before you submit your application. This checklist has been designed to help you determine whether and how you should consolidate your loans."
I hope that helped, good luck!
You didn't state if this are federal student loan or private student loans.
But either way, it's definitely a good idea to consolidate your loans as soon as possible. Even if you lose a month or so of payment deferment you get a jump on paying the loans off. which, now that you've graduated, is your goal.
There are a myriad of places to consolidate your loans, generally the rates on federal loans will be the same, but the repayment terms can vary. Be sure to talk with several companies and ask if they have any discounts available if you consolidate with them. Some offer a discount on the rate if you do an auto-deduct for the payment, others offer a discount for 24 months of on-time payments.
A couple I recommend are Chase Bank, they have a dedicated student loan division that just down consolidation loans. You can reach them through http://www.usadegrees.com/consolidate/ also try Student Loan Advisors at http://www.StudentLoanAdvisors.com
As for what you'll need, most will need your social security number they can look up the loan files (for federal loans) and they can handle it from there. The whole process is pretty easy and only takes about 10 minutes online and another hour or two reviewing the paperwork.
With the credit crunch, there is no longer any profit in loan consolidation and you will likely find the combined rate is no better than what you pay now. If you can even find one.
Absolutely. Contact your school's financial services office or your current lender(s) for information.
YES! Avoid multiple payments and you may even get a better interest rate. Looks better on a credit report too, showing one credit source vs. several.
You're going to hate my answer but….
The best bank through which to consolidate students is the one that will give you the lowest interest rate and who will actually approve your loan. This is really something you need to research yourself. The best bank for me or anyone else will most likely not be the best bank for you because our credit reports are different.
are any financial institutions consolidating right now? i thought all that was put on hold because of the economic worries.
This current rate drop does not affect the interest rates of student loans. The prime issued on July 1st is responsible for that.
Depending on your credit score the rate can be from 7.25% to 13.75%. A co-signer may be needed and could reduce the interest by a 1/4 %.
Keep in mind that private loans have variable interest rates.
To be honest, unless you are consolidating so you have one loan with one servicer, I would just set up automatic payments on the 3 loans until you absolutely need to consolidate. Once you consolidate, you can not re-consolidate at a later time. Since your rate is variable either way, I'd keep the consolidation as an ace in the hole if you ever need it to reduce your payment or get a better interest rate in the future.
Hipe this helps
(worked for Sallie Mae for many years)
If a person has accumulated a large amount of credit card debt due to multiple credit cards, the need for a proper counseling for credit card debt consolidation can't be understated. Credit card debt consolidation counseling helps a person get vital insights into the facts that can help him get control over the credit card debt.
Credit card debt consolidation counselors are experts with a good knowledge of debt management, budgeting and behavioral patterns of credit card holders. These services are vital for those struggling to manage their credit card debts. Also called credit counseling or debt counseling the credit card debt consolidation counseling brings immediate relief to a credit card holder.
A person seeking credit counseling can get it from two types of organizations. The professional or commercial organizations, and the non-profit organizations. As depicted by its name or categorization, the commercial organizations charge money for their credit counseling sessions and consolidation help on the other hand the non-profit organizations offer free of charge services. Just because the non-profit organizations are free, it doesn't undermine their quality of service. The persons associated with such organizations are thorough experts and have lived the trauma of being under credit card debt themselves and hence bring their vital experience to the credit card holder. Read more from: http://www.credit-card-gallery.com/article/353,Credit_card_debt_consolidation_and_credit_counseling_great_tools_to_get_rid_of_credit_card_debt