How Student Loan Consolidation - Federal vs. private loan consolidation

How Student Loan Consolidation - Federal vs. private loan consolidation

Student loan consolidation can be used by students or parents to their borrowers various educational loans into one loan with one monthly payment. As any student can with public or private student loans he or she may also be a public or private education loans to the debt more manageable.

Both federal and private student loans offer significant benefits, but federal loans offer borrowers many benefits that are not, with private loans, for example: low fixed interest rates, income-based repayment plans, loan forgiveness and deferral options. While some private lenders may offer, it is usually found in connection with a number of conditions.

For these reasons, any borrower always exhaust federal student loan options before considering a private loan. The same goes for student loans consolidation advice - always look to the federal loans first, and only if you're not a loan from the federal do not believe it is not the right choice for whatever reason, and then find a private loan.

It is important to remember that not be a federal student loan consolidation for private loans. Furthermore, if your federal student loan consolidation private loans, you lose your federal borrower benefits listed above (unless you have private lenders try to get your business and include them in the listing).

There are important differences between public and private student loan consolidation.

Especially with the federal student loan consolidation, you have a fixed rate, while private student loan consolidation credit-based, which means that your loan rate is not locked - it will be variable. So while you are not going through credit rating to apply for a federal consolidation loan, you need to secure a private loan.

Student loan consolidation rates are different for certain federal and private consolidation. The interest rate on federal loans, according to a formula established by federal statue. It is a fixed interest rate, rounded from the weighted average of the rates for each of your loan at the time of consolidation, following the 1/8th of a percent and a maximum of 8.25%.

as private student loans financed by the federal government, they are subject to the provisions of each lender (banks, credit and other financial institution) and the competition determines the market. In private student loan consolidation loan a borrower is the main factor in the variable interest rate offered to the borrower. As a basis for determining the interest rate consolidation loans, private lenders typically use the prime rate or the 3-month Libor, which they have a safety margin. These vary from lender to lender and the creditworthiness of the borrower applied.

With respect to interest on the loan, it is typical for federal and private loans to 0.25% discount for direct debit payments.

Repayment of federal student loan consolidation will begin within 60 days after the payment of the loan, the term payback ranges from 10 to 30 years, depending on the level of education debt repaid and are among the remaining liabilities and selected on the reimbursement option by the borrowers. Private student loans can be a maximum of 30 years, although fewer repayment options. Normally, the repayment is financed starts 30 days from the date of your private student loans.

While the main factors to look at the decision must be bound at the student loan interest rate, borrower benefits and conditions of repayment, there are other important factors such as consolidation of fees or charges, prepayment penalties, loan amount limits, customer service, etc.

There are no charges or fees for processing applications and providing a federal student loan. It is against the law to ask in advance (advance) costs for the mediation of a federal education loan or to consolidate federal education loans. However, some states education loans (like Stafford and PLUS loans) some costs, but they are always deducted from the disbursement check. On the other hand, private lenders charge fees for processing the application and private loans. Some private lenders fee of 4% of the principal amount you owe.

Federal loan programs do not require a minimum balance to consolidate student loans and some private lenders require a minimum balance before they consider a borrower to apply for a consolidation. This amount varies from lender to lender, but usually between $ 5,000 - $ 7,500 in the U.S. gave private education loans.

With countries private consolidation, there are no penalties for pre-payment - all payments of scheduled payments go directly to capital and help to repay your loan faster.

The application process for the consolidation of private student loans differs from the federal consolidation. Sometimes applications for home loans is perhaps easier to complete (often online or by phone). It is however not forget that the federal loans generally a lower interest rate, borrower benefits and better terms than private student loans have. It also requires the federal loan applications for both initial and FAFSA loans, so with the federal consolidation, your application may be completed for a part