What Are the Major Student Loan Consolidation Benefits?

Most new graduates tend not to earn much at their first jobs, making it difficult to allow them to meet their student loan payments. If you need to reduce your monthly payments, and you anticipate that you'll be earning more later on, then consolidating your loans may be the answer for your problems. When you consolidate your student loans, you'll be making smaller monthly payments since you'll be repaying the debt over a longer time. This is one of the major loan consolidation advantages. Other benefits include making only one monthly payment instead of multiple payments to several lenders, no penalties for early repayment or overpayment and also the interest payments are income tax-deductible.

Student loan consolidation benefits also include interest rate reductions offered by lenders to those who subscribe to automatic direct debit programs and make prompt repayments, to be able to encourage borrowers to sign up with them. On the typical, you will get a 0. 25% discount if you direct-debit your payments and a 1% discount for those who have paid promptly for 36 months. You should be conscious, however, that you will lose the reduction permanently if you're late with just one monthly payment. Even if you're signed up for direct-debit, you can still be late on a payment for those who have an insufficient balance in your bank account.

Another thing to bear in mind is that, although you'll enjoy student loan consolidation benefits as lower monthly payments, in the long run you'll wind up paying more in interest rates. Since loan consolidation can increase the repayment term from the standard ten for student loans up to thirty years, you may end up paying as much as double or even more of the interest you would have paid on your own non-consolidated loans. However, you can reduce the amount of extra interest you'll wind up paying by increasing your monthly payments once you can afford to do this.

Those pursuing careers in low-paying fields may also wish to consider an income-based repayment (IBR) program rather than mortgage consolidation. Under an IBR plan, your monthly payments is going to be capped at an amount based on your income as well as family size, although you will be paying off your loan for 25 years as opposed to the standard ten years of student loans. However, if a person qualify, any remaining balances after 25 years will end up being canceled. Still, if you believe that student loan consolidation benefits outweigh any potential drawbacks, then you should subscribe to a loan consolidation program.
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