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Higher education is very expensive and not everyone can afford it. Everything from accommodation to tuition fees and books has to be paid for. Student loans come in handy for us to follow our dreams and attend the university we always wanted to attend. Their interest rate is lower than the normal interest rate and the repayment period is also much longer. We sometimes take out more than one student loan to help with our finances during college. Paying interest on multiple loans every month can be a daunting task and a student loan consolidation loan comes in handy.
A student loan consolidation loan is one in which all the smaller student loans are combined into one large loan and the student simply has to pay it off every month. There is only one repayment period and one due date to make payments. The loan interest is also very low and you can save precious dollars every month. There are two basic types of student loan consolidation loans and they are federal student consolidation loans and private student consolidation loans.
Benefits of Student Loan Consolidation Loan:
1. The rate of interest on these loans is fixed and it has a much lower interest rate as compared to other loans.
2. There is only one loan to pay so it will not be difficult to remember the due dates.
3. You can have an extended tenure to repay the loan and it can go up to 30 years.
4. As the repayment tenure increases, the amount to be paid every month also reduces significantly.
5. You will not have to pay any extra fee to consolidate these student loans.
6. The application process for this loan is also very simple and there is no penalty for early repayment.
Disadvantages of student loan consolidation loan:
1. The extended repayment term may seem like less money coming out of your pocket, but in the long run you will end up paying much more than what you borrowed.
2. It is extremely important to be very careful about the interest amount you have to pay on the consolidated loan. It may so happen that the consolidated loan has a higher rate of interest as compared to other personal loans. Taking a consolidated loan is more disadvantageous in this case.
3. While taking a consolidation loan, you must also consider the remaining tenure on your various loans. This is especially important when you are taking out the loan for the purpose of consolidating your payments into one (rather than due to financial problems in repaying the loan). If most of your loans are close to maturity, you will not benefit from consolidating such loans.
4. To consolidate the loans within the grace period, you have to pay it off immediately.
Student loans have helped millions of students chase their dreams and become who they are today. Student loan consolidation loans help them in reducing the financial burden to a great extent. The pros and cons should be carefully evaluated before choosing to consolidate student loans.
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