Tag Archives: consolidation
Credit Card Debt Management Consolidations
Credit card debt consolidation can be of two types consolidating all your debts into one debt, or taking a fresh loan to pay off all the existing debts. Technically the latter type is called debt consolidation loan but the term debt consolidation is often used to mean both methods. One should confirm before committing to either alternative and choose whatever method is more suitable to his/her situation.
Mere debt consolidation is not a loan. It is the process wherein you combine all your credit card debts into a single debt with the help of a professional debt management/repayment program of a financial institution. The representative of the program negotiates on your behalf with the credit card companies regarding your outstanding debts. The duty of the representative is to secure a lower rate of interest and reduction in penalties for late payments.
Instead of paying several separate bills every month you make only one consolidated monthly payment of a fixed amount to the debt manager as if there is only one loan. It is his duty to make the payments to the individual creditors and keep your accounts up to date. The programs will require you to stop using your cards till complete repayment of debts. With the systematic guidance of a professional debt management program you can pay off all your debts in a much shorter time than you expect. The service involves fees for securing all these benefits.
The second type of debt consolidation entails taking a fresh loan to pay off the existing loans. It is the oft resorted measure to pay off the credit card debts. A debt consolidation loan facilitates a fixed rate of interest, lower monthly installments and the convenience of servicing a single loan – instead of coordinating between many debts with different rates of interest. Credit card consolidation service providers or help centers extend the necessary assistance to get the loan.
One should be careful before going for a consolidation loan because more often than not they charge a high rate of interest and generally they are secured loans – unlike credit card debts, which are unsecured debts. A default may result in losing the property given as collateral. Choose only a loan with a competitive rate of interest.
Debt consolidation of either type does not revamp your credit rating overnight. But it can help improve your credit history and ensure a debt free future with careful planning. Also, it protects you from harassment of creditors and the humiliation of filing for bankruptcy.
Guide to Private Student Loan Consolidation
Borrowing may be your only option to pay for your college education if you are not eligible for grants and don’t qualify for scholarships. The process of acquiring these loans can be simple enough that you allow the repayment period to begin before you calculate what that monthly amount might be. If your starting salary is less than you anticipated, you may need to consider private student loan consolidation to put your loan into a more manageable format.
Private Student Education Loans
Private education loan consolidation means private loans cannot be comingled with Federal education loans. If you borrowed money with a private education loan, you will need a private education loan consolidation. By doing this you will reset the terms of the loan which may reduce your monthly payments. Usually the interest is not reduced. But if your credit score has improved since you originally applied for the first loan, you may qualify for a reduced interest rate. This may be the case now that you have graduated and gotten a job in your chose profession. You may now be a doctor making a good income and if you’ve been paying your bills on time your scores may have improved 100 points or more, which would definitely qualify you for a better credit score and lower interest rate.
Check with your existing bank to see if your current loans can be consolidated into a lower interest rate loan before you take it to another bank. They may be willing to help you rather than lose your business. If they are not helpful, shop around and find another lender who is willing to give you a private education loan consolidation. When shopping for a private student loan consolidation check to see if the loan is fixed or variable. What are the fees, origination fees, etc? And are there prepayment penalties? You should be able to pay an extra amount that is applied to your balance after collection costs; late charges outstanding interest and principal have been deducted from the payment. Any additional money left is considered prepayment and will be applied to the loan balance. There should be no extra fees associated with prepayment in the original loan. You will have to determine if the private student loan consolidation has fees of this nature.
Private education loan Consolidation Lenders
The Higher Education Act of 1965, The Higher Education Opportunity Act of 2008 and the amended Truth in Lending Act banned fees or penalties for early repayment of private education loans. The competitive institution did not charge prepayment penalties to keep the playing field even for all private lenders. Prepayment can provide a significant savings for the student. The total interest paid can be reduced by the extra payments being applied to the balance first and then the interest, ultimately saving thousands of dollars over the lifetime of a private student loan consolidation.
An EdSucceed Private student loan Consolidation through cuStudentLoans.org will provide loan consolidation for undergraduate students with debt of $7500 to $100,000 and graduate degree recipients with debt of up to $150,000 a 15-year loan. They have a 1.00% origination fee and a variable rate based on prime plus 1.5% to prime plus 4%. Your rate is based on credit and whether or not you select ACH payments. If you have a cosigner, you can release them after the first 12 year of on-time payments if other credit criteria are satisfied.
The student loan Network offers private college loan consolidation for a minimum of $10,000 to a maximum of $300,000. The repayment term ranges from 20-year for $40,000 or less to 30-year for above $40,000. The interest rate is based on 3-month LIBOR plus 5% to 3-month LIBOR plus 8.5%. The origination fee is also a range of 1% to 5%. There are no prepayment penalties and the cosigner is released after 4 years of timely payments and is based on the primary borrower’s credit improving.
Wells Fargo offers private education loan consolidation. They will consolidate a minimum of $5000 and up to $40,000 or up to $100,000 depending on the borrower’s credit. A 15-year term is provided with a variable rate. The interest ranges from prime plus 1% to prime plus 5.75%. The base rate is 3.25%. There is no origination fee associated with this loan. The rate is reduced.5% for automatic debit payments and the rate is reduced further for making 48 payments on time consecutively.
Currently, both Chase and Next Student have temporarily suspended their private student loan consolidation programs. Private student loan consolidations that are variable rate should be compared to a home equity loan with a fixed rate. If the comparison makes a home equity loan more attractive, and you own a home with enough equity in it to finance such a maneuver, this may be a better option than a variable rate loan.
Private Student College Loans And Federal College Loans
The primary difference in private student loan consolidation and federal loan consolidation is private loan rates are higher than federal loans even in consolidation. Federal loans and private loans cannot be mixed into the same consolidation loan. A loan that mixes several loans together often reduces the rate of one or two of the loans and reduces the payment giving the borrower more years to pay. This cannot be done when the loans come from different sources. Guaranteed Student education loans or federal loans with much lower interest rates cannot be mixed with private non-guaranteed loans with much higher interest rates in a private education loan consolidation.
The Consequences Of Default
Private college loan consolidation is there to provide more manageable debt repayments, preventing default or reducing incidences of default. Defaulting on a student loan could result in the IRS offsetting or keeping your federal or state tax refunds and wage garnishments. If you are a federal employee, they can offset 15% of your pay to repay Education loans. You may have to pay additional collection costs, legal action may be taken against you and the credit bureaus will be notified and your credit rating will suffer. Bankruptcy is no longer an option. Student education loans cannot be included in a bankruptcy filing. The only option for reducing payments of a private education loan is a private college loan consolidation. Your total loan term may be extended, lessening your monthly payments.