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Private Student Loan Consolidation: Slashing Repayments For An Easier Life

Like all loans, college loans taken out to fund education and living expenses, have to be repaid sometime. There is little chance of any student or graduate escaping that responsibility. As soon as the period of grace ends (usually on graduation day) that reality comes to bear. Thankfully, a private student loan consolidation program can make life a lot easier.

There is no doubt that the weight of debt can be quite heavy for students, with research showing that college graduates enter the jobs market with debts of $30,000 on average. This means that properly managing college debt is an essential part of the early part of working life.

This is where a consolidation program can be of great benefit, clearing the outstanding balances on student loans and replacing them with one, more affordable debt. However, there are some issues that need to be considered before choosing the program most suitable.

Consolidation Explained

Typically, students take out at least 5 loans while in college, often to cover living expenses as well as pay their tuition fees. But none of them are cleared before taking out another, creating a complicated web of loans, repayments and interest rates. A private student loan consolidation program simplifies matters.

All of the debts are grouped together and cleared with a single loan. And because it is a single loan, a single interest rate is applied. This invariably means the overall cost of the best is lowered. And because the loan term is lengthened to as much as 25 years, the monthly repayments are kept low.

So, managing college debt in this way ensures it is fully repaid and replaced with a more affordable debt that places less pressure on the shoulders of the graduate. But there are conditions to consider when clearing student loans.

Conditions to Consider

First and foremost is the type of loans taken out when in college. The two types are private and federal loans, but these do not mix well in one consolidation program. This is why there are private student loan consolidation programs and federal consolidation programs, and the terms of each are very different.

Federal loans are typically better in their terms than private loans because the support of federal government removes risk and lowers the interest rate charged. A private loan typically charges higher interest so is more expensive. And because of the greater expense, managing college debt from private loans is usually a priority.

Also, private consolidation programs accommodate a wider range of loans, while approval is open to practically anyone who wants to make repaying their student loans more affordable. Federal programs are exclusive to students in dire financial situations who need assistance.

Other Factors To Consider

A private student loan consolidation program offers plenty of benefits to students and graduates looking to clear their debts. Most are already mentioned, but others include the long-term benefit of improving the credit rating. This is due to the clearance of the individual loans, which are marked down in the credit record as fully repaid, but it is important to maintain repayment of the consolidation loan too.

These programs are available to students still in college as well as graduates. And the fact they can be granted 25-year terms means managing college debt becomes very affordable. Graduates, meanwhile, can get terms of up to 30 years.

However, keep in mind that it takes time for the application to be processed, with many lenders taking about 6 weeks to confirm approval or not. And, while awaiting approval, it is essential that the usual monthly repayments on the student loans are made.

How Debt Consolidation Loans With Bad Credit Can Solve Your Financial Problems

It is an unfortunate truth that more and more people are struggling to meet their monthly debt repayments, and that an increasing number are applying for bankruptcy. But there are more constructive solutions to this problem and, in many respects, seeking a debt consolidation loan with bad credit is more desirable.

The reason that bankruptcy should be a last resort is that the consequences can be severe and last a significant length of time. This is mainly because it involves writing off debts without actually repaying them. But consolidation makes clearing debts immediately more practical, and with no great damage to a credit reputation

But as with all loans available, there are conditions to getting debt consolidation loans, and securing the right terms is essential if the exercise is to be of any real benefit.

Consolidation Explained

So, what exactly is consolidation, and how can getting a debt consolidation loan with bad credit be of any really benefit to a borrower? While some might say taking on a new loan is a negative move, the benefits are pretty clear.

The key concept behind consolidation is that funds are secured to buy out the existing debts in one go. By clearing debts immediately, and replacing them with a single, more cost-effective and more manageable debt, the pressure to meet repayments is lessened.

Simply put, 4 individual loans will each come with 4 individual interest rates that together prove to be more expensive than a single interest rate on a single loan would be. So, a debt consolidation loan can be used to lower the pressure to meet monthly obligations.

Key Advantages of Debt Consolidation

Of course, while making monthly repayments easier to meet is a definite advantage, there are more benefits to be enjoyed. For example, even getting a debt consolidation loan with bad credit presents an opportunity to achieve an improved credit score.

This is because repaying any debt affects the credit report, and ultimately improves the credit score a borrower has. By clearing debts immediately, the improvement can be significant with 3 or 4 or 5 loans all being repaid in one go.

However, there is also a significant improvement in the debt-to-income ratio of the borrower. Depending on the terms of the debt consolidation loan, the monthly obligation can fall by as much as 50%. In some cases, the term of the loan is a lengthy 30 years. This slashes the size of the repayments, thus increasing the excess income available.

Choosing The Right Debt Consolidation Program

So, how can an applicant find the right terms, and the right consolidation program? Well, it does depend on your specific debt, but the good news is that securing a debt consolidation loan with bad credit is not a major feat. After all, the purpose of consolidation is to help bad credit borrowers anyway.

Qualifying for these loans comes down to criteria that are similar to those for regular loans, but there is usually an insistence that full-time employment be held for at least 6 months before submitting the application. The advantage of clearing debts immediately makes the wait (if necessary) worthwhile.

And like so many financial products, the best place to get a debt consolidation loan is online where a selection of professional debt consolidation companies can be found. However, check their terms and conditions closely as a fee is required for their services, which can affect the effectiveness of the consolidation agreement.

Debt Consolidation Loans With Bad Credit: Solving Financial Woes In One Fell Swoop

The pressure created through quickly mounting debts can cause real chaos. It does not take long for creditors to begin to demand payment, and unless something is done to deal with the problem, bankruptcy becomes a real possibility. So what is the solution? Well, it is not difficult to secure a debt consolidation loan with bad credit, and to clear the troublesome debts in one go.

The challenge of clearing existing debts, and lifting the weight that can cripple even the hardest working of us, is no light matter. It usually requires great discipline to take control of debts, making it extremely difficult to achieve independently.

A precisely tailored consolidation plan can make a real impact, and a debt consolidation loan provides the means to restructure the money owed into something that is manageable to handle. But how is this possible, and what are the terms that should be sought?

How Consolidation Is The Answer

Applying for a debt consolidation loan with bad credit is a good decision, but it may seem strange that a new loan can actually make your debt situation better. Knowing how consolidation works is the best way to ascertain the effectiveness of the strategy. In its simplest form, consolidation replaces multiple debts with a single loan, thereby removing the complexity and lessening the burden.

The biggest problem with multiple loans and debts is that they each have their own terms. So, 5 loans will have 5 different interest rates and 5 different repayment dates. That means the amount of interest is higher than it needs to be, but clearing existing debts with a single loan means a single interest rate is paid.

And even the principal if the debt consolidation loan is $50,000 to buy out the individual loans, the terms can be much better than those original debts combined, making it much more affordable than the original deals.

What Terms Should Be Sought

Of course, applying for a debt consolidation loan with bad credit is one thing, but securing terms that make it worthwhile is another. By and large, lenders offering consolidation packages are willing to offer very flexible terms, but the key issues are the interest rate and the loan term.

The interest rate can be quite low, but what is most important is that the rate is significantly lower than the average rate charged on the existing loans. That way, clearing existing debts and replacing them with a new loan can be accomplished while making savings – as much as 50% on monthly repayments.

Crucially, however, it is the size of the loan principal that makes the biggest impact, and this is where the loan term comes in. With 5 loans to pay each month, the total sum could easily reach $1,500, but even a $50,000 debt consolidation loan repaid over 10 years could be half that amount. The longer the lifetime of the loan is, the lower the required monthly repayment.

Considering a Consolidation Company

When it comes to applying for a debt consolidation loan with bad credit, there are two chief options. The first is to approach a lender (traditional or online) and apply for a loan large enough to clear existing debts. While securing a large loan might be difficult usually, if the purpose is known to be debt consolidation, approval is more likely.

However, there is no guarantee of approval and this means that the problems might only persist. Another option is to approach a debt consolidation company, professional service providers who will buy out your debt and then receive monthly repayments directly.

Of course, this option is a little more expensive as there are fees to pay on top of interest on the debt consolidation loan. Still, the cost is manageable, and progress in lifting the debt is certain to be made.

By: Mark Venite