Going to university requires a lot of money nowadays, most people don’t have this money upfront. They need financial aid, usually in the form of a student loan. But how do you get out this debt? Sometimes it gets so high, you wonder if you will ever be able to pay it off. Maybe a school loan consolidation program is what you need, but a school loan consolidation programs aren’t quite like magic either.
A great explanation of school loan consolidation
A school loan consolidation program is an extra loan you get, that pays of your original loan on time. This way all the payments will be made on time. This means you won’t forget to pay or even if you don’t have the money to pay, it still gets paid in time. If you don’t have a school loan consolidation program and you don’t pay on time, it has a negative effect on your credit rating, the interest could even go up. a bad credit rating has a negative influence on future loans (e.g. mortgage loan/car loan) and sometimes it can even get in your way when you try to get a new job.
Especially when you have multiple school loans is a school loan consolidation program effective. The loans get lumped together and you only have to worry about paying one sum of money every month. You can usually get a much lower interest rate as well. in general the more loans you have the more advantagous it is to join a school loan consolidation program.
By joining a school loan consolidation program, you can often extend the time in which you have to pay off your loan. Often you can extend the time to over 30 years. This means you have to pay less right now monthly. However I would recommend not getting lazy and just spread it out over as much time as possible. The longer it takes before you pay off your debt, the more interest it accumulates.
The interest rate of a school consolidation loan is usually fixed. So you won’t encounter any surprises down the road. While the interest rates of unconsolidated loans can jump up and down without warning. Of course it’s nice if it jumps down, but it’s more likely that it will jump up. The risk is having to pay more than anticipated.
If you have a federal loan, don’t join a private school loan consolidation program. You will lose your benefits of having a federal loan.