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Student Loan and Consolidation

Student Loan Consolidations are repayment plans which allow you to consolidate all of your loans into one repayment, reducing your monthly payment, which can help enormously when you are just starting out in your career. If you consolidate all of your federal loans, the saving can be significant, with some companies offering around 50%. However, there is a but when it comes to student loan and consolidation.

In this case the "but" is that although you can extend your loan repayment, in some cases for up to 30 years instead of 10, but with student consolidation, you will end up paying more in the long run.

On the positive side, you can make larger payments once your finances improve and you become established in your career, therefore paying off your loan more quickly. Consolidating student loans can be a good step, but you must do your due diligence and get professional advice where necessary.

The law has changed regarding with whom you can consolidate your student loans: in the past you had to consolidate loans with the existing lender, but you can now choose a different lender for your student loan consolidation. The government has also introduced a fixed interest rate for loans. So this will be the same wherever you borrow and you won't get a reduction because you have consolidated your loans.

How do you consolidate your loans?

There are still some good reasons for consolidating your student loans, but you need to be extremely careful and watch out for possibly deceptive information, worded in ways to entice you to consolidate with a particular firm. So be sure to read the small print and to compare alternative student loan consolidation options.

It makes sense to consolidate your educational loans if you are concerned about your ability to pay, as extending the loan over a longer period means smaller payments. Also, having just one loan repayment to keep track of makes balancing your finances a lot easier.

Once you've chosen a company with which to consolidate your loans, you fill in an application, giving details of all your loans. The company will then check all the details and if you are eligible, they will pay your existing loans and then send you details of your repayment plan and the date on which the first payment is due. You must be sure to continue paying all of your loans until you have verification that they have been paid from the consolidation loan company.

Federal and private loans cannot be consolidated together. So if you have both, you will need to look for a private consolidation loan separately. Be sure to do a student loan consolidation comparison before making your final decision.

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