student loan consolidation?
Monday, September 6th, 2010 at
7:31 pm
NETTA M asked:
All total, I have 6 student loans on my credit report from 2 different companies. I write one check to each company per month. How will consolidation these loans effect my credit? I think these 6 accounts will be closed, and 1 new one for the combined total of the 6 opened. Will this drop my score?
All total, I have 6 student loans on my credit report from 2 different companies. I write one check to each company per month. How will consolidation these loans effect my credit? I think these 6 accounts will be closed, and 1 new one for the combined total of the 6 opened. Will this drop my score?
Tagged with: Consolidation Loans • Score • Student Loan Consolidation
Filed under: Student Loans
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I didn’t consolidate mine. You end up paying more in the long run! Think about this. The lenders always want you to consolidate. That is because they get the best end of the deal. As long as you are paying, your credit score should be alright!
It all depends on the rate. If it is fixed and as low as you think it can go then yes it is a good thing only if you do not keep this loan as a pet. In other words if you are now paying $200 a month on all 6 loans and after consolidation you will pay $150– Continue to pay the $200 and the other $50 Will go to principal only and you will get them gone much sooner. Student loans can only be consolidated 1TIME ONLY!
You are right, if you consolidate, the company you consolidate with will pay off your 6 current loans and issue one consolidation loan that covers the cost of the 6 loans. (This is assuming all 6 are federal student loans. If you also have private student loans, they must be consolidated separately.)
The advantage to consolidation is you can lock in interest rates and choose your repayment term. If you choose extended repayment (up to 30 yrs) you will pay more over the life of the loan. However, with the right lender there will be no prepayment penalty, so you can pay it off early but still have the cushion of a lower monthly payment.
Sallie Mae has a handy online calculator that will help you figure out if you should consolidate, and if you choose to do so, what your payments will be.
One last word of advice – don’t be taken in by companies that offer a lower interest rate – the govt sets the interest rate and it’s the same for all consolidators. They compete based on their service (lots will just resell your loan) and their benefits (rate reductions after you pay on time X number of months, etc.) Do your research.
Good luck
Here’s an interesting site with a lot of informative articles on Debt Consolidation:
Improved Credit Score With Student Loan Consolidation
By considering a loan consolidation, borrowers not only save or reduce their long term debt but can also help change their credit score for the better over time. It is worth noting that an improved credit score is a very important factor when a person enters the “real” world and wants a new car, apartment or charge card.
Here are some tips for you that can help you as you enter the job market.
• More Open Accounts, The Lower the Score: Over the student borrower’s life, he or she may have borrowed up to eight separate loans to pay for school. Each of these loans has a different payback amount, payment terms and interest rate. The more accounts the student has opened, the lower the over credit score. Thereby, lowering the amount of open credit lines on a credit report is needed, but this can only be made possible through a student loan consolidation in which the older accounts will be combined into a single account.
• The Lower the Payments, the Higher the Score: When the credit report evaluation comes, it is usual in the process that the amount of the borrower’s monthly minimum payments is taken into account. So, when you hold a number of loans, every payment is considered part of the borrower’s monthly payment obligation. Those who have considered consolidation have only one payment to make, which is typically lower than the minimum amount of the separate, multiple loans.
• The Debt to Credit Ratio Matters: As you may know, the credit bureaus typically find out if you are in debt. They do this by way of evaluating the amount of your available credit you actually use. So, in case you have a total of $10,000 available on three credit lines and you owe $2,000, your score will then be considered higher than especially if you have maxed out your on credit line with a $2,000 limit. It is worthy to note that if a person has several loans with a maximum used, it will reflect negatively on his or her credit score. Given this fact, consolidating the accounts is very important in order to lessen the number of open accounts being used.
yes, you need to consolidate your debts…although you would be paying more in the long run, debt consolidation works and you credit score too would come up in some time….