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Five Drawbacks for Student Loan Consolidation
Before a Student Loan Consolidation, Consider These Five Drawbacks
When considering student loan consolidation, there are a number of variables to consider. The process has both its advantages and disadvantages, all which should be reviewed before jumping into consolidation. The following list contains five potential drawbacks of student loans that students should be familiar with to get some help with debt.
Fixed Interest Rate
When consolidating student loans, you’re automatically given a fixed interest rate. This could be seen as either an advantage of disadvantage. It’s an advantage in the sense that your rate never goes up, yet puts you at a disadvantage when variable rates drop. Fortunately, such drops won’t have a huge financial impact on those paying back their loans, but should still be considered.
Discharge and Deferment Benefits
Certain loan programs provide discharge benefits which provide you with money after graduation. This money is used to pay off the loan. Deferment allows you to delay payments on a loan until the loan ends, and sometimes these benefits won’t remain after consolidation. Therefore you may want to reconsider consolidation so that you can retain these benefits. A viable option would be to leave these loans out of the consolidation process.
Loss of the Grace Period
After graduating, you normally have a six-month grace period in which you don’t have to make loan payments. The idea of this period is to give you an opportunity to find work and relocate if necessary. Consolidating your loans too early causes you to potentially lose this period. That’s not to say, however, that you should completely avoid consolidating during that time. If you consolidate during the grace period you have the potential to get a 0.5% interest discount on your new loan. This is a great way to save some money.
Payment Schedule
Be sure to make a payment schedule that isn’t too long but still remains realistic. Stretching out payments causes your loan take longer to pay off, which in turn means paying even more interest. This is probably one of the most common ways that those in the student loan debt consolidation business capitalize on those who don’t know any better. Be smart about your schedule and pay it off as quickly if you realistically can.
Eliminating Loans
Without consolidation you pay off your loans one by one, meaning that when a loan’s gone it’s gone forever. When you see your loans consolidate, however, they’re all lumped together. Therefore you’ll continue paying until it’s all gone. This is a serious point to consider for those paying off their debt.
In the end, it’s your choice entirely. Weigh the advantages against the drawbacks and determine if loan consolidation is the right path for you.
Refinancing Auto Loans Tips
Some Useful Tips on Refinancing Your Auto Loan
While there are many reasons to refinance your auto loan, there are also some factors to consider in approaching a refinance. Be familiar with the following tips to make sure you take the proper steps towards auto loan refinancing, meanwhile avoiding common mistakes and pitfalls of the process.
Most people attempt an auto loan refinance in order to save some money. Paying off a car loan to refinance the loan can lead to a lower APR. Your interest-rate varies depending on your current credit rating, but improving your credit opens up the possibility of refinancing a car loan and paying less interest. It’s also possible to pay off your car loan quickly by keeping your payment amount the same despite receiving a lower rate. Refinancing at an interest rate of one percent less than what you currently pay can save lots of money over time, however, this may require you to apply for a loan with a different lender. Fortunately, a different lender will most likely be keen on your credibility if you’ve been making payments for at least six months.
Be aware of the fact that many lenders won’t consider you for a loan that’s worth more than your vehicle. You can figure out the value of your car through sites such as Kelley Blue Book. Remember, auto loans aren’t based on the value of your car, but instead on how much you owe on your original loan. If you had poor credit prior to financing your vehicle, don’t panic. Improving your credit score should enable a lower APR that what you’re currently paying. It may not be the lowest possible payments, but you still manage to save.
Don’t approach new lenders without talking to your current one. A good payment history can result to a lower interest rate on your loan. Before switching lenders, however, make sure that your current lender doesn’t charge any prepayment penalties or else you could find yourself deep in the red trying to pay off a penalty. Be cautious when approaching loan and make sure to be familiar with their policies. Although interest rates for used car loans can indeed exceed those of a new car, refinancing can get you a lower rate than those who don’t qualify for the typical zero-to-three percent interest rate offered by manufactures. If you pay attention the numbers and follow the aforementioned refinance tips, you can relieve your debt and find yourself paying less on your auto loan.