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Student Loan Consolidation Companies: Choosing the Best Loan Consolidation Lender

Student Loan Consolidation Companies: Choosing the Best Loan Consolidation Lender

Student Loan Consolidation Companies: Choosing the Best Loan Consolidation Lender

Consolidating your student loans is a way to bring all the loans you’ve taken out from different lenders together into one student loan consolidation company.

How do you choose the best consolidation lender that will offer you the best repayment terms?

Choosing the wrong consolidation lender can cause serious damage to your budget and the overall economy. It is very important to follow some guidelines to help you decide who may be your best consolidation company.

Private vs. Federal.

If your original loans came from a federal source, you will seek federal consolidation. Federal loans are usually more convenient than private loans because of the lower interest rates.

On the other hand, if the loans to be consolidated are of private origin, you will usually go for the private consolidation lender because the federal company will not offer you a good interest rate to consolidate private loans. The reason for choosing this way is that the interest rates and terms vary for both.

Although some private lenders can offer you amounts that consolidate most of your debt, you should always go through the federal company first if most of the loans you need to consolidate.

they are federal.

As a general rule, getting loans from the private consolidation lender means meeting more requirements than the federal ones. Private lenders base their loans on creditworthiness and will look more at your credit score (if you have one) or the cosigner you provide.

Interest rate

Private lenders usually determine interest rates based on two factors: the standard rate (LIBOR) used for loans and your credit score. The higher your credit score, the lower the interest rate that will apply. You will try to find a consolidation lender that offers the lowest possible interest rate. In addition, interest rates can be fixed or variable. The former, of course, are preferable.

Federal lenders (not all federal lenders offer consolidation loans now), on the other hand, calculate the interest rate as the weighted average of the individual interest rates on the loans being consolidated.

Terms and conditions.

It will try to find a lender that offers you the best terms in relation to:

a) Amounts of the loan. You will prefer those lenders who can offer you a loan that covers all of your debt.

b) Fees, usually determined by your credit score. These are usually application fees and origination fees (fees applied to issue the loan).

c) Postponement or period of time between the moment you receive the loan and the moment you begin to repay it.

d) Amortization term or period of time to complete the amortization.

e) If co-signatories are necessary.

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