LOAN CONSOLIDATION: AN INTRODUCTION
Loans are a great source of financial aid to people, especially students who get to pay their educational fee and expenses through loans. But when there are multiple and hefty loans to pay soon after they leave the college then things go burdensome. Consolidating loans can be a great solution to this problem. Loan consolidation works on a principle that lumps up all your loans into a manageable payment mode and also extends the repayment time up to 30 years.
Consolidation occurs when a single lender pays off all your scattered debts and then makes the total balance a consolidation loan with a fixed interest rate and a monthly payment. This will in turn make your total balance higher and hence will increase the time limit for repayment, reducing your monthly payments. The result is you will have just one loan to pay on. Loan consolidation usually provides lower interest rate saving you lots of money; it also reduces the monthly payment as the time limit increases. It also reduces the stress you face in attending different loans, making it into one monthly bill. Loan consolidation process is rather simple; it doesn’t even require any credit checks or co-signer.
There are no charges or any kind of fee. One thing you should keep in mind before consolidating your loans is you should make sure that the interest after consolidating the loans should not increase above your current one. If you are close to pay off your loans then there isn’t any worth going for loan consolidation.
To decide upon consolidation there are few pre requisites such as one should have more than a fixed amount in federal loans to reap the benefits of consolidation. This fixed amount is usually $10,000. Moreover all the loans you wish to consolidate must be under your social security number. You must be in your six months grace period or should have started paying your debts before applying for consolidation. You should have more than one lender.