You have taken multiple loans to fund your tuition fees, hostel charges, and many others. However, it is becoming more and more challenging for you to streamline all your loans. Moreover, recently, you were on the verge of paying a penalty for late payment.
What is the best plan you hit upon? Choosing loan consolidation from a reputed Loan Consolidation Company, right? However, have you thought out the future consequences? You are quite mistaken if you presume that it has no negative effect.
Surprised? In this article, I will help you understand how loan consolidation for students is profitable and where the negative side of this coin lies. Scroll down for more to know more.
What Are The Pros For Loan Consolidation For Students?
Student loan consolidation is definitely a very convenient way to ensure a seamless process of tracking and monitoring your loans. This is mainly due to the fact that all the multiple loans have been replaced with a single loan. Hence, you only require a single payment every month to repay the loan amount. I have listed below some of the pros of student loan consolidation.
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Reduced Interest Rates
When you are dealing with multiple loans, the sum of the interest rate is higher than a single interest rate. Hence, the overall payment amount becomes considerably less. Additionally, you alter from a variable to a fixed-rate loan, which confirms that even if external factors compel the interest rate to hike, your loan rate will remain unaltered till the end. In my opinion, this will also help in reducing the entire loan sum.
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One Single Payment
In my experience, paying a single amount to a single source every month is more feasible and convenient than paying multiple sums to multiple accounts. Loan consolidation is certainly the only process that helps you achieve that convenience. Additionally, you can also avail yourself of the various borrower’s benefits.
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Multiple Repay Plans
How you repay back the loan amount is another very fundamental benefit Loan Consolidation Company offers their customers. There are several repayment options for you to choose from. Moreover, you get a gradual rise in the repayment structure known as graduated repayment. Here, you have to pay a lesser amount in the initial months, and then the monthly payments increase at a regular pace.
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Extended Repay Term
When you shift to the new loan structure in the consolidation process, you get an opportunity to increase the loan tenure to a certain extent. However, here I would like to advise you not to extend it mindlessly. This might decrease the monthly payment amount. However, the overall amount will increase due to the recurring interest rate.
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Reduced EMIs
As I have mentioned earlier, the interest rates decrease when you choose this consolidation. Hence, it reduces the overall amount; this, in return, lowers the monthly instalment amount. Hence, it is quite a profitable option for students.
Can Loan Consolidation For Students Have Cons?
Considering the benefits, many of us ignore the negative impact of loan consolidation on students. I have listed some of the major disadvantages it might have. Hence, I would suggest that students should carefully consider choosing this option.
- If you extend the loan term, the repayment amount becomes more
- You might lose borrower benefits from previous lenders, such as rebates, interest rates, etc.
- You need to pay a penalty for repaying the loan amount since you have repaid the amount to your previous lenders before the term ends.
- You will have to pay back the borrower’s benefits. For instance, fee waivers or other monetary considerations.
Wrapping Up
The loan consolidation for students has both positive and negative impacts on the student’s life. Hence, it is essential for students to consider their decision very critically. Moreover, it is important to opt for a renowned loan consolidation company that offers various benefits and disadvantages to borrowers.