The main thing, which graduates seek, when they plan to consolidate student loans is the lower monthly payments, because they have still low incomes and lot of expenses to pay for. They may have two benefits in their minds. To lengthen the payment time to lower the annual payments and to get lower interest rate. But are both beneficial ones?
1. The Lower Interest Rate Is Wise To Take.
When you will consolidate student loans, you have a natural time to negotiate new interest rates for yourself. This concerns only the private student loans, because the federal ones have fixed rates. Why you should pay more for the same money. If you have better credit score, that means automatically lower interest rates. If the interest rate reduction brings enough help for your monthly payments, why to take the longer payment time?
2. The Longer Payment Time Brings More To Pay.
The longer payment time simple postpones the payments to the future. The price is, that you will pay more interest and that will increase your total expenses for your loans. Is that wise? Not, if you would be able to pay the loans in a shorter time, but yes, if you need the extra money urgently for some necessary expenses.
3. If You Will Consolidate Student Loans, Take The Full Benefits!
So the answer is, that it is wise to consolidate. Whether you will ask for longer payment time or not, is your own decision. But, what is worth doing is to maximise the benefits and to try to get as low interest as possible. What tools would you use? The lender, probably a bank, is a business and all businesses need growth. Now you can try the concentration trick by asking, what is the interest if you and your family would concentrate all the loans, credit cards and so on into the same lender?
4. What If You Do Not Consolidate?
The first thing is, that your interest for the private student loans will be higher, than what you could get with the consolidation. That would be stupid!. The other terms would remain the same as what you had agreed when you singed the loans. The payment times would probably be the usual ones and if you will manage with them, very good.
The loan management with several loans is probably quite time-consuming and would require planning, but is in no case too difficult. Just submit the payments into your computer or handheld calender and you can keep them in order all the time.
Juhani Tontti, B.Sc., Marketing. If you do not want to consolidate student loans, you will miss the student loan consolidation biggest benefit, which is the lower interest rate. Visit: consolidated student loans