University and college students around the world often have to consider their long term financial plans when choosing which institution, where and which courses to take due to the ever increasingly high cost of post secondary education. It can be hard for students fresh out of high school to agree to take on the mountains of debt that is associated with going to university but it can be a great way to solidify your place in the future. So can you consolidate your student loans to make it cheaper? How do you go about it? Here is a quick rough guide to loan consolidation and whether it’s right for you.
What Is Consolidation?
Consolidation of debts of any kind is a process where you sit down with a financial adviser or other financial planner of types and organise a system of putting all debts into one lower monthly payment spread over a longer term. Consolidation of debts works well when people have a couple of different types of debts and each monthly payment results in repayments that can be crippling to their financial wellness. Consolidation can also be done with only one debt where the term and repayment amount is renegotiated to be lower and more manageable.
Consider Your Situation
The first main step in consolidating your loans is to consider your own specific individual situation. Not all options are clear cut and work for everyone and if you’re fairly close to paying back your loans it’s likely that consolidation won’t be right for you. Say you only have one year left to pay back your loans. Consolidating may stretch it out to two years. Sure, you will have lower monthly payments, but you will now have an added year to pay it back unless you pay back extra a month. Paying back extra a month may likewise create issues and some financiers actually have penalties for those who pay back more than the agreed amount.
Which Loans Do You Have?
The types of loans you have can also affect whether you can consolidate – or whether you should. For example, government student loans may have perks and benefits such as low interest rates that are considered to be null and void if you choose to consolidate the loans with a private lender such as a major bank. Check with your preferred financial planner as to what your terms and fine print on your specific loan are in regard to consolidation and potential penalties you may incur by doing so.
If you choose to consolidate you can enjoy lower repayment amounts stretched over a longer period. For some people this is great but for others this may cause troubles so it’s important to consider your own individual situation and the pros and cons associated with doing this. Overall consolidation can be a great move for many and will help you stay on top of your repayments and maintain a good to excellent credit rating which is beneficial later in life when it comes to buying a house or car or even just getting loans for other things as well. So be sure to read the fine print, consider your options and take your time in considering what to do. Good luck!