Albert William asked:


A person who goes for the student loan consolidation may have a few questions in mind to ask about such consolidation process. You may be concerned about the student loan consolidation interest rates so that you can pick up the best among them.  Conversely you may be concerned with the payments you make while your loan consolidation is in process.

The first question that comes to your mind always is why consolidate.  The answer is that you consolidate your student loans to reduce the monthly premiums, get the principal reduced, enhance your savings so that you could use the extra money fruitfully or repay the loans much earlier than the scheduled dates.


Best time to go for consolidation student loans

If you can consolidate your student loans immediately after your graduation within the grace period you are likely to derive the maximum advantages out of such consolidation.  The basic advantage of consolidating loans in the grace period is that you can lock down the lowest interest rates payable. Such consolidation is one of the best options when you try to improve your monthly cash flow or extend the repayment time span.  The best part of it is that you can easily get some additional discount financially benefiting you in the process.

You will however have to pay on your loan dues while your loan consolidation is in process. Normally the process of student loan consolidation can take time in the range of 30-90 days.  It is extremely important that you do not become a defaulter during this period which will render you ineligible for such loan consolidation.



Effects of the time taken for student loan consolidation

Since your consolidator will keep up to date track of your loan transactions the consolidation will be accordingly revised basing on the payments you have made since you submitted your application. The time span could be faster at 30-40 days or a bit delayed at 80-90 days. 

Normally the period taken for processing and approval of your student loan consolidation application is dependent on the payoff statements and the response of your lenders.  The Loan Verification Certificates, also called the LVCs may take some time to come from these lenders.  However they will come and you will have your loan consolidated and previous accounts closed.

There could even be some circumstances, though rare, where you could sell your loans to others. 

What do you do in case you are ineligible for student loan consolidation?

Under certain circumstances you may become ineligible for student loan consolidation.  Such situations are –

•    When you have already consolidated your loans earlier.

•    If your loan amount is less than $20,000.

•    When you owe repayment to only one lender.

If you are perturbed about the steps to be taken in such cases you may try one of the following options –

•    You may consider some private student loan consolidation plan.

•    You could refinance your home or some other properties to pay off the loan amount.

•    Best student loan consolidation rate can give you income tax exemptions.

•    You may obtain a personal loan from a bank or credit union.

Jeff Moynihan asked:


A report states that there are 900 million people who seek the help of credit consolidation agencies but only one in a million successfully complete the debt management program. There are many reasons for the limited success of the credit consolidation programs. When you signup for credit consolidation you get the benefit of paying your debts in smaller installments some times with lowered interests and your late fee waived off. This will make your life with heavy debts manageable.

Though you enjoy the above benefits of credit consolidation, there are other hidden disadvantages. One of the major disadvantages is that you end up paying back your debts for a longer period of time because of the size of the installments but if you calculate the total value you pay, in spite of the reduced interest rates it will certainly be more than the value that you would have paid otherwise. Other disadvantage is that sometimes the credit consolidation agencies charge an enormous fee to render their service.

If you dont find the right agency, you will be lured into empty promises that give you hope of having things changed over night. If you come across such agencies the first thing you do is to look for an alternative agency that will help you meet the reality and handle it efficiently.

Some credit consolidation agencies will talk you to signup for debt management programs and offer upfront loans to pay off the debt. But this will give you only a temporary relief and often you end up with higher interest rates on these loans.

However, not all credit consolidation agencies are bad. There are good agencies that help people get out of their debts successfully. They will help you out in budgeting your money, they will help you out in understanding your spending pattern and gain control over it. They will counsel you on how to keep to your debt management plan.

Look for agencies that will allow you to be flexible with the payback pattern, for instance if you find yourself having some extra bit of money on a particular month then you should be able to pay towards your debt. If they are out for making money out of you they will not allow you to make additional payment and you will be forced to settle your debt over a longer period of time. If you wish you should be able to pay more towards your monthly payment to settle your debt faster.

What is very important while learning to manage your debt is not to incur any huge expense. This will only add on to your burden.

Summary:

Seeking for credit consolidation has many benefits as it makes your debts manageable. At the same time there are a few disadvantages such as extended life of loan and hence higher total value of the loan to be paid. Rigid payment plans sometimes does not allow you to finish off your loan faster. Credit consolidation agencies are sometimes more keen in signing you up for their credit management program than in getting you out of debt. So they tend to collect higher monthly fee for the service they render.