When considering student loan consolidation or refinancing, you need to gain a transparent look at the current debt situation that you have, while this line has been stressed by many over the years, students fail to understand the importance and depth of the assertion.
In order to get a clear picture of your current financial situation, there are a few elements that you need to keep and eye on.
FICO Score
The very first factor that will affect the lenders decision to forward you a consolidation loan for your student debt is whether or not you have a good FICO score. The importance of this number will vary according to the nature of the student loans that have accumulated. If you have pr
A low credit score may also meant that the terms of repayment on the consolidation loan may not be favorable, leading to a higher interest rate.ivate student loans, then you will have to keep your credit score in check. A federal consolidation loan however may be obtained even with a lower credit score.
You can obtain a free credit report annually and the best time to go over it is during a loan application. Assess the credit report for any discrepancies and get them corrected in order to show an accurate view of your current situation.
Not a Loophole or Shortcut
Students are often looking for a way out of the debt crisis. One thing that must be clarified is that student loan consolidation does not mean that the loan has gone away or has decreased. While the smaller monthly payments may have taken off the burden, you need to consider the long term effects as well. Understand what your future goals are. Would you rather pay off more today and be done with the loan early or pay smaller amounts over a longer duration?
Consider All Options
Before opting for a consolidation loan you should assess all repayment options that you are faced with. Chances are the bank will let you set up a debt negotiation meeting where the terms of the debt will be rehashed. Chances are the debtor may write off a substantial amount of the loan. This is done when banks can see the inability of an individual to pay off the debt and they are attempting to reduce their losses as much as possible.
Make Informed Decisions
When signing the contract for the consolidation loan, make sure that you read the fine print on the contract, know what you’re agreeing to, and make sure you understand the details of the contract. If you are having trouble understanding the details, ask for assistance from someone or even a lawyer. While this may seem a little excessive, it is thoroughly important so you can avoid any future problems.
Credit Insurance
The best way to seek out a fraudulent agency is when they start offering credit insurance. Credit insurance is not a mandatory requirement and it is important not to be pressured into the situation. Credit insurance can end up costing much more than the original amount. The moment you feel like you’re being pressured into a credit insurance scam, notify the authorities immediately.
Student loan consolidation is a major decision. In fact it may even be one of the first few adult decisions you make in your life. This is why it is important to make it in a clear and informed manner. It may take up a lot of time and effort, but the numbers need to be absolutely clear in your head before consolidation is considered.
Sources
http://www.forbes.com/2009/04/15/student-loans-moneybuilder-personal-finance-consolidate.html
