Even though variable rates may appear lucrative because of their low nature at the beginning, they keep rising with time. Thus, signing up for a low variable rate now puts you at the risk of committing to rising rates that may hurt in the years to come. As someone with many student loans, you might have asked about consolidating your private student loans and how you can go about doing so. Fixed rates may appear high at the start, but the fact that they never change not only makes them predictable but also low in the long run, thus they may be the better option.
Here are some of the features and benefits of loan consolidation.
Multiple repayments consolidated into one payment
As it is, the average student loan user has about seven loans with two or three loan services. Multiple loans with various loan services can be tough to manage. Consolidating them into one payment provides you with one payment to make, thus making it easier for you to remember, not only the payment deadline but also how much you owe and to whom.
Lower interest rate
Fixed interest rates are always cheaper in the long run. Lower interest rate is a very direct advantage of consolidation. A lower interest rate means you give out less in form of loan repayment and keep more for yourself over the loan repayment period.
Lower monthly payment
Consolidation lowers the amount of money you remit every month as loan repayment. On average, loan repayment terms range from five to twenty years. Extending the payment period reduces the amount of money you are required to pay every month quite significantly. Reduction of money you pay every month gives you much relief, especially if you are on a tight budget. Therefore, you get more room to pursue other financial goals of life.
Anticipation of earning soon
Since repayment terms vary with consolidation plans, there are those that offer incredibly flexible repayment plans. These arrangements consider your current income, your financial commitments as well as future possibilities of a rise in your income. Anticipation of earning soon is particularly useful to fresh graduates earning an entry salary with anticipation of an increase coming through salary reviews or promotions at their places of work.
Possibility of releasing a co-signer
Since many students lack a steady income and credit history, they need a co-signer to meet eligibility criteria for loans. Although, co-signers may wish to free themselves from keeping their name on your loan records once you get financially established, they help a great deal before you get there. Please note that some banks offer consolidations with co-signer releases. Check with your potential lender for this option.