American Loan Guide

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A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.

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

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. For e.g.:- (when one or more of the loans have to be repaid in less than 10 years because of minimum payment requirements), a Student consolidation loan may decrease the monthly payment without extending the overall loan term beyond 10 years.

Student consolidation loans can help with many bills and reduce payments into one low monthly payment. Before deciding which step to take it is important to learn what the company is offering and what bills can be included in the consolidation loan. The interest rate on Student consolidated loan is calculated by taking the average of the loans which are being consolidated.

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.

All unsecured debt such as collection agency debts, personal loans, medical bills, credit card debt, and student loans can be included in a consolidation loan. A consolidation loan gives you one monthly payment instead of several.

College graduates could be looking at a significant increase in the interest rates they pay on federal student loans if they don't consolidate their student loans. The US government sets the rates for all federal student loans based on the 91-day Treasury Bill (T-bill) rate at the end of May of each calendar year. The rates are then fixed for the year, becoming effective July 1, and affect all non-consolidated student loans.

Graduates and students graduating should consolidate as soon as they are out of school. Locking in current rates can save thousands of dollars.

A student consolidation loan combines several federal student or parent loans into a single larger loan. Most federal loans can be consolidated: Stafford, PLUS (Parent Loans to Undergraduate Students), Supplemental, Direct, Perkins and others.

Downsides to consolidation
The most obvious downside is that even though your payments are smaller, you are extending them over a longer time. That means you'll pay out more total interest. Also, as with any kind of consolidation loan, the borrower may be tempted to spend more or even borrow more because of the smaller loan payments. Then you're just piling up more debt than if you hadn't consolidated.


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