Posts Tagged ‘Consolidated Loans’
December 21st, 2009
One of the great things about student loans, and consolidated student loans in particular, is the low interest rate. By consolidating your loans you sometimes see a drop in the interest rate by 1-2%. It seems small and insignificant, but if you follow the tips from this article you can actually turn that reduction into profits.
As mentioned above, consolidated loans typically provide you with a lower interest rate than unconsolidated loans. They also offer repayment plans that can extend for up to 30 years. If you are a disciplined person who has a little bit extra money, you can use the money you save on payments each month to earn you cash.
Here’s how it works. When you consolidate, your payments are usually lowered, which means there’s extra money between what you used to pay each month and your new minimum payment. Instead of taking that extra money and spending it on impulse purchases and fun, it would be a good idea to use it to pay off extra principle on your loan. This can drastically cut down on the length of your loan, meaning you’ll pay less in interest. Not a bad idea. But it will only save you money, not earn it.
In order to earn extra money from your consolidated student loans you’ll need to take that extra money each month and invest it into a money market fund that has historically earned more than your current interest rate. For example, if your consolidated interest rate is 6.5%, you’ll want to find a mutual fund that has consistently returned 10-12% or more. Then you’ll earn 4-5% on your extra money every year. And here’s the best part: doing it now will allow compound interest to kick in, so after the life of the loan you’ll have a nice nest egg of profits from the money you were expecting to spend every month anyway.
And that’s not all! Federal student loan interest is tax deductible. So you’ll be able to claim the interest you pay on those loans every year, saving you even more money.
Keep in mind that while all this sounds great, there are risks involved. Although over time the stock market has been stable, there is a small chance you could lose your investment or make less in returns than you’re paying in loan interest. For these reasons it’s best to seek professional consultation before making any sort of investment.
With that said, this method is considered low risk and should at least be contemplated if you’re fortunate enough to have some extra money each month.
Visit School Loans Consolidation Guide for more student loan advice such as facts about your federal school loan and information on how educational loan consolidation works.
By: RJ Licata
December 7th, 2009
Before we get to the answer, you should firstly ask yourself do I need to consolidate my student loan that’s under $10,000? Believe it or not a $10,000 student loan debt is not a very large one. If you’re still studying or going to keep studying then the best thing to do is not to consolidate your loan just yet.
When consolidating your loans you’ll reduce your monthly payments however once you’ve consolidated your loans not every lender will be happy when you want to re-consolidate your loan again. However there are ways to re-consolidate your student loans but we’ll get to that in a minute.
To answer the question, yes you can consolidate your loan if it’s under $10,000 however the lowest amount you can consolidate is around $7,500. If you’ve got anything lower than this amount it is not worth consolidating.
Suppose your still studying and are thinking of lower your repayments. The first thing you should do before consolidating is to see if you need more money first. If you have another 2 or 3 years left then you should borrow more before you consolidate.
Once you’ve figured out how much you need the next thing to do is consolidate your loan. If you consolidate your student loans with a private lender you might not be able to re-consolidate your student loan if you need more money. So make sure you ask your lender before you consolidate if they can re-consolidate your loan later in the future.
Not everyone lender will want to re-consolidate your loan so you’ll need to get around 4 student consolidation loan lenders on hand in case you can’t find a lender willing to re-consolidate your loan.
Now here’s a tip for you supposing that you already have a consolidated loan.
If you already consolidated your student loan then you should be aware of a small loop hole. However this only works if you have a federal student loan. First thing you need to do is go out and get another federal student loan. Then the next thing you should do is go to your current loan consolidator and ask them to combine your new federal loan with your existing consolidated loan.
This is technically re-consolidating your loan however it works with most lenders because you’re adding a new loan to your already consolidated loan.
To conclude the best tip I can offer you are this. Before you study, work out how much money you’ll need to borrow for your entire course. Then consolidate your loan immediately to lower your repayments. But make sure your lender allows you to add additional federal loans in the future and you’ll be set for your studies. Good luck with the rest of your studies.
By: Marc Lindsay
November 16th, 2009
“Can I refinance a consolidated student loan?” is a common question for students who
have consolidated their student loans but are still having a hard time paying the
monthly payment. So, is it possible?
The answer for this question depends on whether your consolidated loan is a federal
consolidated loan or a private consolidated loan. In the case of a federal student loan,
your refinancing opportunities are limited.
You can only refinance your loan if you are adding new money to the federal loan, or you must be switching into the Direct Loan program in order to obtain public service loan forgiveness or a handful of other very limited circumstances. However, re-consolidating a federal consolidation loan does not relock the rates on the original loans. Rather, the interest rate on the new consolidation loan will be based on the current fixed rate of the old consolidation loan. It does not depend on your credit score.
Private consolidation loans have a variable interest rate that is based in part on your credit score. So if your credit score has improved significantly (minimum of 50 points, but ideally at least 100), you might be able to obtain a better interest rate on your private student loans by consolidating them. However, lenders have increased the interest rates on private loans by 2% to 4%, depending on credit scores.
It is more difficult to obtain a private student loan these days; a 700 FICO score might not be good enough. Also, a 6% rate on a private student loan would be among the best available, so you’d be unlikely to obtain a better rate on a refinance.
Federal loans cannot be consolidated into a private consolidation loan. Even if it’s possible, the interest rates on private loans are generally higher. Likewise, private student loans cannot be consolidated into federal consolidated loans.
I hope I was able to answer question, “Can I refinance a consolidated student loan?” I hope you’d be able to seek other options that could help lighten your financial load.
By: ghirly marie aquino