The Student Loan Consolidation Process
Pros and Cons of Student Loan Consolidation
The Pros and Cons of Student Loan Consolidation
Student loan consolidation is a process that is gaining popularity as the years go by. The basis behind consolidating one's student loans is that individuals obtain a new loan where all of their prior student loans are included in one lump sum. The previous multiple student loans are paid off and the borrower becomes attached to a new lender. The borrower will then make all future payments to this new lender. Student loan consolidation is a beneficial process and it is pertinent to discuss the pros and cons of consolidating one's student loans. By doing so, interested individuals will be able to make a decision as to whether student loan consolidation is the right avenue for them to pursue with regard to paying off their current student loans.
The Pros of Student Loan Consolidation
There are many pros associated with student loan consolidation. Perhaps this is why consolidating one's student loans is such a popular process these days. The first pro which is associated with consolidating student loans is that one may be able to obtain a lower interest rate on their new loan than what they are currently paying. Interest rates on student loans and student loan repayments fluctuate. Therefore, there is always a chance that one would be able to obtain a lower interest rate on their current borrowed amount which is still owed. Additionally, various lenders will offer a variety of different rates. With that in mind, one can see how consolidating one's student loans with a different lender can reduce their current interest rate payments. Interest rate reductions are a widely cited pro of student loan consolidation.
Another pro one may see when consolidating their student loans is more favorable loan conditions and terms. All loans are usually a little bit different from one another. Some loans have more restrictive loan terms and conditions whereas others will be more flexible in their terms and conditions. By consolidating one's student loans these borrowers are obtaining a new loan and one may find that the terms and conditions of the new loan are more favorable to the borrower than the prior loan.
An additional benefit to student loan consolidation is that the borrower gets a chance to switch lenders. This is important for those individuals who feel that their current student loan lender is less than adequate. This may be the case for a number of reasons such as poor customer service, lack of convenient business hours or unavailability of web-based access to one's account information. When an individual consolidates their student loans they are able to choose a lender which may be more favorable to their individual needs.
One who embarks on student loan consolidation may also benefit from doing so if they wish to extend their repayment term. Individuals who take out student loans are put on a repayment schedule where they must pay off the entire loan amount by a certain point in time. Frequently, one who consolidates their loans will be able to extend their repayment term by obtaining a new loan term with the new lender. This will not only enable individuals to get an extended loan term but also be able to lower their monthly payments by doing so.
Another pro to consolidating one's student loans is the ease in which one is able to do so. The application process for loan consolidation is extremely convenient and most individuals will only need to fill out a one-page application form in order to do so. In addition to the single application form, one who applies for consolidation will rarely have to go through a credit check or pay any fees in which to do so. The convenience of student loan consolidation makes it quite a favorable option for many individuals who are paying back their school loans.
For those borrowers who are paying multiple school loans to different lenders, another benefit to student loan consolidation is that these individuals will soon be able to make a single monthly payment as opposed to multiple ones. If a borrower consolidates all of their prior student loans with one lender, the convenience of paying a single monthly student loan payment will be seen by these individuals.
The Cons of Student Loan Consolidation
On the alternative, there are certain cons which one may see associated with student loan consolidation. One such con which may exist for individuals who consolidate their school loans deals with deferment and forbearance issues. Deferments and forbearances both relate to the ability of individual's to put their payments on hold for some reason or another. One type is absolute whereas the other is discretionary on the part of the lender. In some cases, when individuals consolidate their student loans they will be unable to put their payments on hold for any reason. This is something for those who wish to consolidate to keep in the back of their minds.
Another con which is associated with student loan consolidation relates to the grace period. Many student loans have a grace period wherein the recent graduate has a certain amount of time before loan repayment begins. Frequently, when an individual chooses to consolidate a loan that has not begun its repayment phase yet they will give up their right to a grace period. For individuals who are still looking for full time work post-college, this might be an important issue to consider.
Lastly, in certain instances, individuals who have previously consolidated their school loans may not be able to do so again. There are certain lenders which only allow consolidation one time. Therefore, if the interest rates decline, one who has consolidated may not be able to do so again in the future.
Conclusion
There are pros and cons associated with student loan consolidation. It is important to note that many of the pros may in fact overcome the cons which one could see with student loan consolidation. Individuals who are considering student loan consolidation should review the aforementioned pros and cons and determine whether consolidating their loans is a step in the right direction.