If you took out multiple private student loans to pay for college, your repayment schedule is almost certainly among your top priorities. For many students, consolidating private student loans is a win-win: you can potentially qualify for a lower interest rate and pay off your debt faster!
But jumpstarting the process requires a bit of know-how – which is why having an informative resource on student loan consolidation can be a big help.
When Should I Consolidate My Student Loans?
The concept of consolidating your student loans is simple: you take all your loans and lump them into a single student loan. If you net a lower interest rate in the process, you’ll save money, simplifying your finances!
One of the primary benefits of private student loan consolidation is how interest factors into the equation.
Specifically, with a federal consolidation loan, your total interest amount could actually increase if you extend your repayment term. Even though your monthly payments become lower, you end up paying more interest over the life of the loan.
However, if you go through a private lender to combine your loans, you can potentially decrease your total interest cost!
The process also comes with other benefits, including making only one monthly payment, paying a single interest rate, and of course, saving money.
That said, consolidation may not be for everyone, particularly if you already pay an exceptionally low interest rate.
Consider consolidating your student loans if you have:
- Multiple student loans
- High interest rates on your current loan(s)
- A credit score in the 700s or upper 600s
- Stable income or employment
- Keep in mind, if you expect your credit score to disqualify you from a better rate, you can ask a cosigner to hop aboard!
How to Consolidate Private Student Loans
Consolidating your private student loans is like any other lending process: you need to research, compare, and select what works for you. After all, you’re not just lumping your payments together – you’re replacing your old loans with a new loan.
Consider the Repayment Options
You can use a consolidation calculator to discover scenarios that would help you save on your interest rate, lower your payment, and extend your payment term.
Interest rates in particular are crucial, as private lenders’ rates range from 2.5% to over 9%. And your repayment term may vary from as few as 10 years to as many as 25.
Keep in mind that your credit score, income, and educational background can influence both of these factors.
Research Private Student Loan Consolidation Lenders
After you’ve determined that consolidation works for you, it’s time to research private student loan consolidation lenders. Consider factors such as:
- How your credit score and income impact your options
- The range of interest rates for which you qualify
- Whether fixed vs variable APR works better for you
- How much you can afford to pay per month
- How long you want to spend paying down your loan
Asking these questions upfront will prepare you for making an informed decision.
Choose the Lender that Suits Your Needs
After you’ve researched and compared lenders, it’s time to choose. Ask yourself questions like:
- Which lender offers the best repayment plan? What about interest rates?
- How knowledgeable is their staff and customer support?
- Do you feel comfortable working with this lender for the duration of the loan?
And once you’ve answered these questions, you probably have your answer. At that point, it’s just a matter of signing on the dotted line.
Private Student Loan Consolidation is Within Reach!
Once you know how to consolidate private student loans (not to mention the potential benefits), the opportunity seems like a no-brainer. With a little research, you can streamline your loans into one monthly payment – and may even qualify for a better interest rate!