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Consolidate And Reduce Rates of Student Debt
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Consolidate And Reduce Rates of Student Debt
Quick Student Loans
Quick loans are student loans from a long-intended government initiative to aid students financially for higher education. The purpose is to help students cover living costs. To apply for a student loan, contact your local award authority that takes care of the first stage of the loan, irrespective of the country you want to study in.
To use a live example, Janey and Jim get $15,000 in student loans. Now Janey pays just $147 a month while Jim pays $170. Yet both will take ten years to repay their student loans. The difference is due to Janey availing of the unbelievably low interest offer of 3.37 percent on student loans by consolidating and refinancing her student debt. Jim however, chose to opt for the 6 percent rate.
The Right Time Is Now!
To understand better, this is not considered a good time to consolidate student loans and fix interest rates, but the best opportunity for years to come. Waste no time in going for it. Lately personal finance writers and financial planners have made it an annual habit to announce to the world that rates are at an all time low on student loans and that graduates should lock in their interest rates.
However, this time is different; unlike the last four years, with the economy flourishing, inflation approaching and the Federal Reserve hiking interest rates. But in spite of mortgage prices and consumer loans rising, rates on government-guaranteed student loans continue declining, mainly due to a unique formula based on the rate of the short-term Treasury bill.
Stafford loans, the cheapest, most common student loan, fell to a 39-year low of 3.37 percent for the next 12 months, from 3.42 percent the previous year. PLUS loans or parent loan for undergraduate students register 4.17 percent from 4.22 percent. Four years back these loans were at 8.19 and 8.99 percent respectively.
No credit check or collateral is necessary to consolidate. Anyone out of school or attending classes less than half time is eligible. Students with direct federal loans can consolidate while still in school. Lenders may instruct you to combine two loans, refusing to finance only one, or carry a minimum loan amount, for example $10,000.
Some Precautions
Take care of consolidated Perkins loans, especially if you want to continue studies. While you're in school, the government subsidizes interest for a while and may even wave off the loan completely if you choose certain professions like law enforcement. But this doesn't apply to the new loan.
Also graduates who've crossed a certain stage in the repayment process to earn a prompt-payment discount, mostly 1 percent could lose the privilege. It's unfortunate that once consolidated you can't consolidate again unless you have at least one federal student loan outside that debt. If the low rates haven't tempted you, maybe you will be when you find out that Congress is considering elimination of fixed-rate student loans.
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Truth About Bad Credit Debt Consolidation
Bad credit restricts approval for most kind of loans and even if approval is possible, the loan terms are altered to match the risk implied in the financial transaction for the lender. In order for a loan to be suitable for debt consolidation, there are however, certain terms that need to meet some requirements and bad credit may impede this.
Secured And Unsecured Consolidation Loans
Secured consolidation loans are home equity loans or second mortgages that use your home equity to guarantee the loan amount. The interest rate charged for this kind of loans is low and thus, they are perfect for consolidating debt. Since the loan is guaranteed, there are not harsh credit requirements and someone with bad credit can easily get approved.
Unsecured consolidation loans have no collateral at all and thus, the risk involved in the financial transaction is higher and so is the interest rate charged for them. The lack of collateral also implies that the lender will have more strict requirements for approval and though someone with bad credit may get approved, he will be required to pay higher interest rates.
Thus, bad credit applicants should be divided in two: those who are homeowners and thus, despite their bad credit can obtain a reasonable interest rate and those who are non-homeowners and need to resort to unsecured consolidation loans. The latter, even if they qualify and get approved for an unsecured consolidation loan, chances are that they'll have to face higher interest rates and thus, consolidating with a higher rate makes the transaction too onerous to be useful.
Consolidation Loan Amount
The loan amount is also an important issue, depending on the amount of outstanding debt you have, you'll need to apply for a high amount consolidation loan or a small or medium amount consolidation loan. High loan amounts can only be obtained through secured consolidation loans and thus, only those with bad credit who are homeowners can consolidate high amounts of debt.
Those who are non-homeowners can only obtain small to medium loan amounts by requesting an unsecured consolidation loan. Else, non-homeowners should hire the services of a debt consolidation agency that can negotiate with creditors new loan terms since qualifying for an unsecured consolidation loan with bad credit is difficult and you can't obtain high loan amounts.
As you can see, obtaining a bad credit consolidation loan is almost impossible for tenants and non-homeowners. It is better for them to hire a debt consolidation agency and have their debts re-negotiated. However, those bad credit applicants who can offer an asset as collateral can get secured consolidation loans for fair amounts in order to exchange their expensive debt for a single and cheaper loan.
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Consolidate And Reduce Rates of Student Debt
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