Bad Credit Debt Consolidation Loans

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Loan Consolidation

About Loan Consolidation

Federal student loan consolidation lets you combine all of your federal student loans into a single loan with a fixed interest rate. Because you only have one loan from a single lender, you only have one payment to make each month. This can really simplify the repayment process.

You can consolidate most kinds of federal student loans, as long as the loans are in your name. For example, if you took out Stafford loans for each year you were in school, you can consolidate them. But you can't consolidate them with Parent PLUS loans your parents took out to help pay for your education. You also can't consolidate federal loans with alternative (private) loans.

Benefits of Consolidation

There are a lot reasons to consider consolidating your loans.

The Impact of Consolidation

• Convenience. Simply put, making only one student loan payment each month is a lot easier than making a bunch of payments. Consolidating can save you a lot of time and hassle.
• Lower Monthly Payments. Depending on how much you owe, you may be able to extend your repayment period up to 30 years, instead of the standard 10. This can lower your monthly payments considerably, making it easier to pay all your bills from month to month.
• Fixed Interest Rate. When you consolidate, the interest rate of your new loan is based on the weighted average of the interest rates of all the loans you consolidate. This allows you to lock in one rate for the entire life of your loan.
• Repayment Flexibility. As with most other federal student loans, Consolidation loans offer deferment and forbearance options to help you out in case you have trouble making payments.

Other Things to Consider

Even though Consolidation loans can be a great option, there are a couple things that could be seen as disadvantages.

A Way to Keep Your Grace Period

When you apply for a Consolidation loan, you can choose to delay loan processing until each loan you're consolidating reaches the end of its grace period. This allows you to lock in the lower interest rates without forfeiting your grace periods. To make sure you don't miss this option, use our Consolidation Loan Assistant. Note: If you consolidate while you're still in school, you're not eligible for this option.

• Total Cost. The longer you take to pay off a loan, the more interest you end up paying in the long run. If you extend your repayment period to make your monthly payments more manageable, you'll ultimately end up paying more.
• No Grace Period. Consolidation loans don't have grace periods like most federal student loans. This means that your first payment is due soon after the loan is made.

Best Student Loan Consolidations

Best student loan consolidation plans have many benefits for the consumer. Many lenders offer very low rates when student debts are consolidated. The best student loan consolidations will allow one easy payment with one low interest rate. Research should be done in order to find offers since many companies claim to offer ideal solutions and only one can truly be the best. A good place to search for financial help is the Internet. This is a great resource for researching any topic and providing someone with an "education" free of charge. By using any one of the many search engines, best student loan consolidation choices will be far more clear.

The most popular websites will be at the top and can be reviewed one by one until all the information is acquired. By comparing information from several different sources, consumers can make an educated decision about which company offers the most reasonable package. Begin by looking for the lowest rate and affordable payment terms among all the different types of plans being marketed. Consumers should keep in mind that Internet fraud (promising what cannot and will not be delivered)is rampant. It pays to do this financial homework, read the fine print, and choose a lender that is well recognized in the field. The longer the terms of the contract, the more interest will be levied against the borrower. If terms can be shortened by making extra payments whenever possible, more interest on the best student loan consolidations can be saved. Before signing the contract, consumers should take care to determine if this is possible without incurring a penalty.

If there is a local lender with a proven trustworthy and reliable record, borrowers can inquire about the best student loan consolidation program in an introductory meeting. Especially if a consumer has worked with a certain lender before and knows that they are reliable, it may be that a known lender may be able to offer the best student loan consolidations around. It will be somewhat easier than working with a lender whose credibility may still be in question. A lender that knows his client, both the payment history and his involvement in the community, may be more likely to offer the best student loan consolidation options.

There are many avenues borrowers can take in pursuit of the best student loan consolidations. It's important to be wise and cautious before making a final decision because each program needs to be doubly beneficial: affordable and also effective in reducing a complicated burden of debt.

source : Best Student Loan Consolidations

Student Loan Consolidation - How does it Work?

Student loans are a great source of financial aid for students who need help paying for their education. Unfortunately, students often leave college with burdensome debt. In addition, they often have multiple loans from different lenders, meaning they are writing more than one loan repayment check each month. The solution to this problem is loan consolidation.

What is loan consolidation?

Loan consolidation means bundling all your student loans into a single loan with one lender and one repayment plan. You can think of loan consolidation as akin to refinancing a home mortgage. When you consolidate your student loans, the balances of your existing student loans are paid off, with the total balance rolling over into one consolidated loan. The end result is that you have only one student loan to pay on.

Both students and their parents can consolidate loans.

Should I consolidate my loans?

Loan consolidation offers many benefits:

* Locks in a fixed, usually lower, interest rate for the term of your loan, potentially saving you thousands of dollars (depending on the interest rates of your original loans)
* Lowers your monthly payment
* Combines your student loan payments into one monthly bill

In addition, consolidated loans have flexible repayment options and no fees, charges, or prepayment penalties. There are also no credit checks or co-signers required.

You should consider consolidating your loans if the consolidation loan would have a lower interest rate than your current loans, particularly if you are having trouble making you monthly payments. However, if you are close to paying off your existing loans, consolidation may not be worth it.
How will the interest rate for the consolidated loan be?

The interest rate for your consolidated loan is calculated by averaging the interest rate of all the loans being consolidated and then rounding up to the next one-eighth of one percent. The maximum interest rate is 8.25 percent.

To figure your interest rate, visit loanconsolidation.ed.gov for an online calculator that will do the math for you.

How much can I save?

How much you save by consolidating loans depends on what interest rate you get and whether you choose to extend your repayment plan. According to Sallie Mae, the leading provider of student loans in the United States, consolidating student loans can reduce monthly payments by up to 54 percent. However, the only way to reduce your payment this much is to extend your repayment plan. You typically have 10 years to repay student loans, but, depending on the amount you're consolidating, you can extend your repayment plan all the way up to 30 years. Remember that if you choose to extend your repayment term, it will take longer to pay off your overall debt and you'll pay more in interest. There are no preypayment penalties, so you can always choose to pay off the loan early.

Am I eligible to consolidate my loans?

In order to consolidate your loans, you must meet the following criteria:

* You are in your six-month grace period following graduation or you have started repaying your loans
* You have eligible loans totaling over $7,500
* You have more than one lender
* You have not already consolidated your student loans, or since consolidation you have gone back to school and acquired new student loans

The following types of loans can be consolidated:

* Direct Subsidized and Unsubsidized Loans
* Federal Subsidized and Unsubsidized Federal Stafford Loans
* Direct PLUS Loans and Federal PLUS Loans
* Direct Consolidation Loans and Federal Consolidation Loans
* Guaranteed Student Loans
* Federal Insured Student Loans
* Federal Supplemental Loans for Students
* Auxiliary Loans to Assist Students
* Federal Perkins Loans
* National Direct Student Loans
* National Defense Student Loans
* Health Education Assistance Loans
* Health Professions Student Loans
* Loans for Disadvantaged Students
* Nursing Student Loans

Where can I get a consolidation loan?

You can consolidate your loans through any bank or credit union that participates in the Federal Family Education Loan Program, or directly from the U.S. Department of Education. The loan terms and conditions are generally the same, regardless of where you consolidate. You may want to check first with the lenders that hold your current loans.

If all your loans are with one lender, you must consolidate with that lender.

If you decide to consolidate your student loans, remember that you can only do so once unless you go back to school and take out more loans. Therefore, you will want to make sure you get the best deal the first time. The interest rate will be the same from all lenders, but some lenders may offer future rate discounts for prompt payment and a discount for having monthly payments directly debited from your account.
Can my spouse and I consolidate our loans together?

You can consolidate your loans together, but it is not a good idea for a couple reasons:

* Both of you will always be responsible to repay the loan, even if you later separate or divorce
* If you need to defer payment on the loan, both of you will have to meet the deferment criteria

When should I consolidate my loans?

You can consolidate your loans any time during your six-month grace period or after you have started repaying your loans. If you consolidate during your grace period, you may be able to get a lower interest rate. However, since you will lose the rest of the grace period, it is a good idea to wait until the fifth month of the grace period before consolidating. The consolidation process usually takes 30-45 days.

source : Student Loan Consolidation - How does it Work?

Student Loan Consolidation

Student Loan Consolidation, also called a Student Consolidation Loan, combines several student or parent loans into one bigger loan from a single lender, which is then used to pay off the balances on the other loans. Consolidation loans are available for most federal loans, including FFELP (Stafford, PLUS and SLS), FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans. Some lenders offer consolidation loans for private loans as well.

How It Works

Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. Depending on the loan amount, the term of the loan can be extended from 12 to 30 years. (10 years for less than $7,500; 12 years for $7,500 to $10,000; 15 years for $10,000 to $20,000; 20 years for $20,000 to $40,000; 25 years for $40,000 to $60,000; and 30 years for $60,000 and above.) The reduced monthly payment may make the loan easier to repay for some borrowers. However, by extending the term of a loan the total amount of interest paid is increased.

In certain circumstances (for example, when one or more of the loans was being repaid in less than 10 years because of minimum payment requirements), a consolidation loan may decrease the monthly payment without extending the overall loan term beyond 10 years. In effect, the shorter-term loan is being extended to 10 years. The total amount of interest paid will increase unless you continue to make the same monthly payment as before, in which case the total amount of interest paid will decrease.

The interest rate on consolidation loans is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%.

If a student consolidates their loans before they enter repayment, the interest rate used is the lower in-school interest rate. Thus, although the rounding up of the weighted average can potentially cost the student as much as 0.12%, a student who consolidates before entering repayment can save as much as 0.6%, a substantial net savings. (The in-school interest rate is 1.7% plus the 91-day treasury bill rate from the last auction in May. During repayment, the interest rate is the 91-day T-bill rate plus 2.3%.) This loophole has been confirmed by an excerpt from the Federal Register and direct correspondence with the US Department of Education. Additional details can be found in the interest rate loophole section.

Some graduate students have found it necessary to consolidate their educational loans when applying for a mortgage on a house.

To find out more about Student Loan Consolidation, check with your lender.

Alternatives

Consolidation simplifies the repayment process but does involve a slight increase in the interest rate. Students who are having trouble making their payments should consider some of the alternate repayment terms provided for federal loans. Income contingent payments, for example, are adjusted to compensate for a lower monthly income. Graduated repayment provides lower payments during the first two years after graduation. Extended repayment allows you to extend the term of the loan without consolidation. Although each of these options increases the total amount of interest paid, the increase is less than that caused by consolidation.

source : Student Loan Consolidation

Debt consolidation

Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.

Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, most commonly a house. In this case, a mortgage is secured against the house. The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.

Sometimes, debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.

Debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or car may get a lower rate through a secured loan using their property as collateral. Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest.

Because of the theoretical advantage that debt consolidation offers a consumer that has high interest debt balances, companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan. Sometimes these fees are near the state maximum for mortgage fees. In addition, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that they are behind on the payments. If the client does not refinance they may lose their house, so they are willing to pay any allowable fee to complete the debt consolidation. In some cases the situation is that the client does not have enough time to shop for another lender with lower fees and may not even be fully aware of them. This practice is known as predatory lending. Certainly many, if not most, debt consolidation transactions do not involve predatory lending.