Unfortunately, it can often be much easier to get into debt than to get out of it. Fortunately, there are often several options for debtors who want to pay off the money they owe and get on track to financial freedom. For those struggling to keep up with a number of different payments, debt consolidation loans are often one of the best choices – but can they be used for private student loans?
What is debt consolidation?
While taking out another loan may not seem like such a wise idea when you’re already dealing with multiple debts, there’s good reason why so many people across the U.S choose debt consolidation to help them to pay off the money they owe.
Essentially, by consolidating your debt, you’re rolling all of your current balances into one. There are often a number of benefits that can come from doing this – from making your debt much more manageable, to reducing your monthly payments by cutting out the multiple interest rates you would have to pay on several debts.
Even though the lower interest rate can often be a great bonus for almost anyone dealing with debts, you may not actually get a lower rate on your loan as it stands. However, the main benefit of taking out a debt consolidation loan is to make it easier to keep on top of the repayments you need to make to your creditors, not to save money (although it is a benefit that you won’t want to pass up if given the opportunity).
Can it help with your student loans?
There are often a number of different kinds of debts that you’ll be able to consolidate, such as credit card balances and medical bills. Fortunately, you’ll often be able to roll together any private education loans that you have too – although in some cases, you may not be able to consolidate private and federal ones together.
Generally, since you’ll be getting a new loan with the remaining balance of your other debts, you’re likely to start a brand-new loan term too – which can be both an advantage and a drawback. While some would rather pay off their debt as soon as possible, others may be glad to pay back their loan over a longer duration, since this can often reduce their monthly payments.
You’ll also be able to get a reduced monthly payment if your interest rates drop – although in most cases, this can depend on your credit score.
How can your credit score affect your debt consolidation?
Your score can often be quite important to the new loan you take out, and a better credit score can make everything easier for you.
A debt consolidation company will typically take your score into consideration when deciding on whether to give you a loan and how high your interest rates should be. Because of this, you may find yourself struggling a bit if you have a less than perfect score.
If your credit score has improved since you took out your student loan though, you may be in luck. Since the interest on private student loans are typically based on your credit score, you’re likely to get a better rate if your score has improved over the years. If your score has stayed more or less the same, you‘ll have a similar amount of interest to pay.
If you want to save as much cash as possible on your debt consolidation, but know that your credit score has lowered since you took out your loan, you may want to consider looking at what options are available for improving your credit. Often, it’s best to wait a little while longer to get better credit and an overall better consolidation loan.