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Features of Student Loan Consolidation
In todays scenario, where the whole world is reeling under a huge economic crisis, paying off multiple student loans can prove to be really difficult. Apart from the fact that you need to remember the monthly repayment dates for all your student loans, keeping a track of the varying interest rates and paying off huge sums of money each month can surely disturb your monthly budget. Therefore, if you are looking for an option that is far simpler and can assist you in lowering your monthly repayments, you can go ahead and consolidate student loans. Yes, by consolidating your student loans you end up making life much easier for you. Here are some key features of student loan consolidation:
To begin with, instead of paying simultaneous monthly payments, each with a different date, you simply need to make a single monthly payment. After you consolidate student loans, you are presented with a fixed interest rate that is capped at 8.25 percent, which is much lower than the interest rate of your student loans. The monthly payment, if you consolidate student loans, becomes pretty less than the total of your individual student loan monthly payments. The repayment period can increase, if you consolidate student loans. Therefore, instead of paying off all your loans within 10 years, you can consolidate them and extend the loan repayment period to 12, 15, 20, and even 30 years. You can pay off your single consolidated loan electronically. Most lending companies even offer you 0.25 percent off on the interest rate, if you pay your monthly installments electronically. You do not need to pay any processing fees to consolidate student loans. The whole process is free of cost, which is yet another advantage for you. Students as well as parents who borrowed the money can consolidate student loans. However, students and their parents cannot combine their individual loans for consolidation. This is because only loans from a single borrower can be consolidated. You have the option to consolidate student loans with any lender. This provides with the facility to look for lenders that offer the lowest interest rates and other benefits.
With such great features, it is not surprising that more and more students opt to consolidate student loans. This makes life relatively easier for them and allows them to concentrate on their job and career. By getting to consolidate student loans, you know how much exactly you need to shell out each month. In addition, the single monthly payment, which can be paid electronically or through direct debit from your bank, relieves you from remembering the monthly loan repayment date. A lower monthly repayment option is one feature that most students look out for while repaying their student loan. This is because most fresh graduates need to be contended with a low monthly salary that can increase only through performance and experience. In such a situation lower monthly repayments are really welcome to such graduates. This and the above mentioned features, is exactly the reason why student loan consolidation is gaining such prominence.
Why Not To Use a Payday Loan
Payday loans may be fast and easy to obtain but before you sign on the dotted line it’s not just the high interest rates that you need to consider.
Originally the form of lending known as “Payday Loans” originated in the USA and has now landed on the shores of the UK – spreading at an alarming rate.
Payday loans are short term credit loans that are repaid in full on the day that you receive your salary from your employer. Payday loans are really designed to get you out of a ‘fix’ when you find yourself short of money before payday but they do have an extremely high interest rate attached to them.
A typical example of this would be that you borrow £100 but repay £130 or £140!!
When you take into account that a Payday loan is a fairly short term form of lending, the interest rate is a great deal higher than other forms of lending.
Now it may just be that you find yourself in desperate need of a small loan and a Payday loan will fit your circumstances. What you will need to bear in mind is that if you are short of money one month and you borrow money in the form of a Payday loan then you will need to pay the original amount that you borrowed, plus the interest.
This may have a ‘knock-on’ effect of then leaving you short of money again. When faced with that situation you may be tempted to turn to the Payday Loan option again and this is where the hidden danger is waiting for you.
Let’s say that you borrowed £200 one month and on your payday you paid back £260. This would leave a £260 hole in your wages which could temp you (or leave you no other option) but to use the Payday loan option again and borrow another £200.
This is the start of a vicious circle that many people find themselves trapped and the payday loan hidden trap will have snagged another victim.
Each month when you repay the £200 loan you are paying £260 out of your wages – this leaves a £260 hole in your wages – so you borrow £200 again to ‘fill the hole’.
Then the process repeats itself again when you have to repay £260 on payday – you’re trapped in the Payday loan circle of debt.
The loan company lend you £200 once – it’s the same £200 the re-lend you each month – and for this pleasure you are paying them £60 each month when you repay the loan.
Over a 12 month period you will have paid the loan company £1,200 for basically borrowing one lot of £200.
It is a very harsh reality for many people who unfortunately have no other option and are unable to get out of the circle. If you are considering a payday loan then carefully think about what you are getting in to before borrowing any money.
If you have no other option and are 100% certain that you will have enough money to repay the loan without it affecting the next months finances then a payday loan could be your only option.
Otherwise don’t fall into the payday loan trap. Try and get through or ask a friend to lend you some money – even if it isn’t as much as a Payday loan company – it will be cheaper when it comes to paying it back.