The 7 Steps Of Consolidating Private Student Loans

By Author: Cornie Herring
Total Articles: 3
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Education is an investment for a better career future, but it can be an expensive endeavor financially. Many students need to apply for either scholarships or student loans to get their college study funded. Private student loans are the common alternatives for students who fail to get a scholarship to get the needed financial support for their college study. After the graduation, these students need to repay the loan, but if they can afford to repay it according to the payment schedule, the high interest rate can easily roll up the balance and causes a debt problem and financial burden. Therefore, before the private student loans become debt burden, students may consider to consolidate them into a low interest loan. Besides taking advantage of low interest rate, the consolidation will ease the debt management. Consolidating the private student loans can be challenging, but if you follow the seven steps below, things get easy:

Step 1: List down all the private student loans

The first step of consolidating private student loans is to get to know the amount, interest rate and monthly payment of each one so that you ...
... can compare with the new loan. The aim of consolidation is to get the most benefits from the process. You can compare the existing outstanding balances with the new loan to ensure the selected consolidation offer works at your advantage. List and sort them in the order from largest outstanding balance with the most expensive rate to the lowest. Just in case the new loan is not enough to cover all accounts, you should prioritize on the most expensive loans listed on top of the list.

Steps 2: Understand the terms of each private student loan

If you read the loan agreement carefully, you should see a term explaining the penalties incurred if you settle it before the schedule. Therefore, you have to review the terms of your current loans. Record down the penalties and the charges that will cost you if you settle them earlier than the terms specified in the agreements.

Steps 3: Make sure your credit report has no error

The value of credit score determines the interest rate, the loan amount and the chances for the loan applications to get approved. You should keep the figure as high as possible. Credit score is important reviewing factor when lenders process loan applications. So, you have to make sure your score is correctly indicated your credit status. So, you have to clean up your credit report to make sure all errors found are corrected before you submit for a loan application. If you encounter errors in your credit report, have they corrected by writing to the credit bureau that issued the report with errors.

Steps 4: Define your purpose of consolidating the loan

Once you know the objectives of consolidating private student loans, there are various options for you to choose from. Let's say you have financial difficulties to make the monthly payments on the student loans you have borrowed, then you are aiming to reduce the monthly payment after the consolidation. By knowing what you are looking for, you will be able to find a consolidation loan that meets your purposes. In order to reduce the monthly payment, you will need to consolidate the private student loans into a low interest rate loan that has long repayment period. But, you need to aware that the longer the repayment period the more interest will incur, making you pay more in total loan + interest payment. On the other hand, if you want to take advantage of current fixed interest rate loan and you own a home, then home equity loan can be a good option for you.

Steps 5: Decide a consolidation loan

Once you have identified your objectives of consolidating the private student loans, it's time to start looking for a consolidation loan than can meet your purposes. There are many good offers in the market, you should compare them in term of costs, interest rates and other benefits before you shortlist them for further review.

Steps 6: Short-list and contact the lenders

Unless you are guaranteed to be approved with the best consolidation loan, short-list a few of the best offers and you may want to submit more than one application to increase your chance to secure the best one. Next, contact the lenders and let them explain to you how their debt consolidation programs will benefit you. If you have excellent credit rating, don't agree to the first interest offer because you stay at the best chance to get a further reduced rate.

Steps 7: Review and accept a consolidation loan

The last step of consolidating private student loans is reviewing the fine-print of agreement you are interested in signing with. During the review of agreement, it is important to make sure the promised interest rate and fees are stated in the agreement before putting your signature on to the agreement. Once you have consolidated the private student loans, you just need to focus on paying the repayment for new loan, until it is paid off.

Cornie Herring is a finance expert and author forhttp://www.debtconsolidationmakeeasy.com. Visit her website to learn about debt consolidation and find the best way to consolidate credit card debt.