Student Loans: Private Loan Consolidation

Loans are an inevitable part of anyone’s life these days; you just can’t get through all the massive, expensive tasks that come your way on your own. An important one is the education loan.

The banks are just too happy to help you with loans as long as you continue to pay them the interest amounts of the loans. But at any later stage in life given the option to consolidate all your loans into one it is seen that many people hesitate citing the reason that they want to keep the monthly payments small. This belief that consolidation of loans makes the payments deficit is an absolute myth; the very much desired fixed rate loans are a reason strong enough to have a thought about the consolidation of your loans anyway. During loan consolidation you are creating small manageable monthly payments and also get to enjoy the perks of a fixed rate loan.

Private loan consolidation: the working

Consolidation of the loans from the private lenders begins by calling the original lender and asking him to roll all your private loans into one larger loan. It can also be the case that you have more than one private bad credit loans lender then it is worthwhile to contact each of them about the option of merging all these into one large loan that consolidates all the loans from the others and them. While you are consolidating your loan you have the liberty to drop your cosigner also the terms of interest that you get when consolidating are much better than the terms you got at the start since your credit may not have been excellent at that time. You can get better PRIME plus rates than what you got at the time of issuing of the loan due to the lack of good credit.

Federal student laws do provide you with the facility that you can postpone payments in case you are undergoing financial difficulties, you do not get any such privileges. There is never a guarantee on private loans that you will get cooperation from your lender when you are undergoing some kind of financial difficulty. But it is always better to ask about things and get a clear idea of the provisions rather than assuming so check with your lender when any such financial problem arises that whether he or she will allow you to have some temporary relief from the payments while you suffer from some financial setback.

If the lender agrees to any such provision, then it is better that you get the aid some written proof, so that when such time comes you can have a written back up to make sure you get the help.

An alternative to loan consolidations

Loan consolidation can be a very good option always but if you are very sure that you do not want to opt for this particular option then you can look for the option of credit cards. It is not always very sound to transfer the student loans to your credit cards. But if you get a 0% transfer of balance for the next twelve months or you get a 4% transfer of balance for the loan tenure it becomes be an option that you can try and transfer part of your student debt to your credit cards.

But when you opt transferring the student loan debt to your credit card there are a few questions that you should answer first:

Question 1) is there an origination fee for the transfer of balance?

If you take into consideration the time duration that it is going to take you to finally pay off the whole loan and also considering that you can be charged a three to five percent origination fee, there is a chance the positive effect created by this option (of transferring your student loans or a part of it to your credit cards) may be nullified entirely.

Question 2) when will the promotional interest rate rise?

It is very important information that you should pay heed to. When you transfer a certain balance to your credit card there is a fixed time for which there is a promotional interest rate, which happens to be better than the usual rate, but for a fixed period of time, so if you fail to pay that particular transferred balance during that period of time then the promotional rate will no longer be there once the term gets over, your previous original rate will begin to apply.

Question 3) Will your promotional rate affect the rest of your balance?

When you transfer a student loan for your credit card balance you get a promotional rate for a fixed period of time and since both balances are on your credit card now it becomes confusing what rate will apply to what and which one will be paid off first? The rate that was applied to your credit card balance earlier will remain the same for that balance of yours and the promotional rate will only apply to the student no credit check loans debt that you transferred and this is the part of the balance that is paid off first.

Question 4) does this balance transfer have an effect on your credit rating?

In case that the amount you are transferring to your credit account on adding up to the balance makes the total go above, your credit limit then you will have to reduce the transfer. Your credit card balance should never be more than half of your credit limit.