Your credit score can go up if you combine all of your student loans into one.
Most college students take out more than one loan to pay for school. Each loan has its own interest rate and payment amount. There are a lot of different loan sources, which is great for paying for college. However, if you have a long list of outstanding loans, it can hurt your credit score in a big way.
By consolidating your student loans, your credit report will only show one loan, usually with a much lower total payment. This means that your credit score will be higher. By consolidating your student loans, you'll probably be able to make a much lower payment each month. This will lower your ratio of debt to income.
When you consolidate your student loans, your debt to income ratio goes down and your buying power goes up.
Having a low debt-to-income ratio, which is the amount you owe each month compared to the amount you earn, has a huge effect on how much money you can borrow and spend on things like a first home or reliable transportation.
Last year, the amount of household debt in the US was more than the amount of money people could spend. Rising education costs have made it harder and harder for today's college graduates to get a job. The interest rates on each new loan go up as your ratio of debt to income goes up. Keeping this ratio low by paying less each month can save you tens of thousands of dollars over the course of your life.
Student loan consolidation makes people less reliant on credit cards.
Having lower bills in the years after college means you will use credit cards and other loans with high interest rates less. The average college student has a balance of more than $2100 on six credit cards.
This means that a $100 credit card purchase for new clothes for work could end up costing more than $200 by the time the full balance is paid off in a year. Smart financial planning, like consolidating student loans, can help students and young professionals get rid of their high-interest debts and live a debt-free life.
By consolidating your student loans, you lock in the low fixed rates of today.
Interest rates might be low now, but that doesn't mean they'll stay that way. In fact, rates have been lower in the last few years than they have ever been in recent times. It's amazing how much a small percentage point can save or cost on a college bill over the course of a loan repayment.
When you consolidate student loans with a Federal Consolidation Loan, you can lock in the low interest rates that are available right now. Most consolidation loans have a longer time to pay back and a lower monthly payment than the education loans they replace.
By combining your student loans, you can get more discounts on your interest rates.
ScholarPoint.com and other companies that specialise in consolidating student loans offer extra benefits like automatic payments and payments made in a row.
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When you consolidate your student loans, you can get a lower interest rate if you set up automatic payments from your bank account.
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Consecutive Payments: Some companies that help you consolidate your student loans will let you lower your interest rate by up to one full percentage point if you make payments on time.
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No Interest Deferral: Use the flexibility of student loans to your advantage by putting off payments when you can. If you are in graduate school, the military, or the Peace Corps, you can not only put off payments, but you can also stop interest from building up.
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Grace Period: If you consolidate your debt during your grace period, you can lock in a lower rate than the standard rate.
