Consolidation deal is sometimes a marketing trick

There may be an upfront fee to pay or an administrative or arrangement fees for processing the refinancing. Some banks also charge early repayment fees, while others do not; so shop around for the best deal. Remember, that a debt consolidation deal is sometimes a marketing trick to attract extra attention for a standard personal loan.

And, there are other pitfalls to consider. You need to ensure the deal you are getting on your new financing is really better than the situation you were in before. Yes, you might have lower, more manageable repayments but your new loan consolidation provider may extend the term you repay that debt over a longer period. So while it gives you more money in the short term, you will pay much more in interest payments.

Also, check the rate. You need to ask the financial provider if it is a flat or reducing rate because there is a difference and personal loans can be advertised in both. While flat rates are usually lower; they might not be the most cost-effective option, whereas a reducing rate is calculated on the outstanding balance so compare like for like.

Make a smart decision about your debt relief

If your main goal right now is to get out of debt fast, that should not be your primary reason for choosing a solution. To make a smart decision about your debt relief program or debt loan consolidation, there are two important considerations that has very little to do with how fast you can pay off your debts.

Make sure you can afford the payments of the debt solution. First of all, you need to know your financial capabilities. This simply means you need to know what type of program can suit your payment abilities. There is a right debt solution as loan consolidation for every financial situation. If you have enough to pay for your basic needs and your debt payments at the same time, then a solution that provides a structured payment scheme should be enough for you.

Consider how the debt relief process will affect your credit history. Your financial goals are simply what you want to happen after you get rid of all your debts. Some people have not looked past their goals of getting out of debt. However, it is highly advised that you draft out even a generalized plan so that you can make a better choice. Most of the time, the issue here involves your credit score. Regardless of your financial goal, whether that is to buy a home, put up a business or even get a new job, you will find that your credit score will play a role in all of them.

Lower rate with private consolidation loan

Good Way to Consolidate Private Student Loans
If you have more than one private student loan from a bank or other lenders, you can make life easier by consolidating private student loans into one loan with one monthly payment. Student loan consolidation payments could end up lower than your current payments.

Loan Consolidation Can Help Save Money
Private student loan consolidation may potentially help you save time and money with one easy low monthly payment on your private student loans. Depending on the details of the borrower’s current private student loan debt, a private student loan consolidation can potentially lead to thousands of dollars in savings on annual payments and interest expense.

Lower Rate With Private Consolidation Loan
Since the interest rates on private student loans are based on your credit score, you may be able to get a lower interest rate through a private consolidation loan if your credit score has improved significantly since you first obtained the loan. Also, you can try talking to the current holder of your loans, to see if they’ll reduce the interest rate on your loans rather than lose your loans to another lender.

Private Consolidation Loan Is a Single
A new consolidation loan issued by the bank or credit union that pays off all, or some of your existing private loans. In most cases your old loans were probably held by other banks; not the one you are already with. If you are approved, the new lender will pay off the old loans on your behalf and roll that obligation into a single, new consolidation loan.

Private Consolidation Loans are Offered Through Banks
Students with private loans must apply for consolidation directly through a consolidation loan lender. Unlike federal consolidation, which is through the Federal Department of Education, private consolidation loans are offered through banks, credit unions, and other private lending institutions. Most lenders allow borrowers to file the application directly on their website, making the process straightforward.

Accelerate your payments as your income grows

The main and primary financial benefit of loan consolidation is simplified your payments. Rather than five, ten, or more payments every month, you have only one or two payments to make. Your options depend on many factors, including: whether your loans are federal or private (and you may have both), how much you earn, what assets you have, and whether you’re being contacted for collections.

In many cases, debt consolidation stretches the term of the loan, so you may actually pay more in interest over the life of the loan. If possible, try to accelerate your payments as your income grows to avoid paying additional interest. However, any discounts you receive for consolidating student loans will reduce the total interest you pay over the life of the loan.

Finally, student loan consolidation makes it easier to keep track of total annual interest paid. That figure is important if you are eligible for the student loan interest tax deduction. Although the deduction will not save you a lot of money, every little bit helps. It is hard to give any specific, helpful advice, without knowing more details about situation. A first step is trying to speak to creditors or debt loan consolidation lenders, in order to work out some kind of payment plan.

Too many borrowers remain unaided

The greatest challenge we face at this moment, however, has less to do with the price of new student loans than it does the $1.1 trillion that has already been drawn down. And while the government has made a decent effort to address this problem, too many borrowers remain unaided because their loans have been deemed ineligible for one reason or another.

The government should expand its relief programs to include all student loans – without regard for origination source (government versus private), payment status (current versus past due) or any previous action (consolidation, forbearance) – so that they can be restructured in a way that makes it possible for all borrowers to repay all their debts in full.

This compendium of measures – revising the tax and bankruptcy codes, holding schools financially responsible for their outcomes, fairly pricing and structuring student loans, setting sensible loan limits and, most important, forthrightly addressing the existing debt – make sense for the benefit of the borrowers, their benefactors (the taxpayers) and the economy as a whole.