College and loans go hand-in-hand these days. However, being smart about how you pay off your loans is very important in both, the short and long term. Student loan consolidation has proven to be one of the more popular and more effective ways of paying back student loans. It is easier to manage, more affordable and students are more likely to make payments in a timely fashion.
When speaking of consolidating your student loans, there are a few key factors that will help make this decision.
Timing And Tracking Payments
A lot of students suffer from student debt because either, they have borrowed from various lenders and are unable to keep track of the payment dates or, the payments are more than what they can handle. Subsequently, missing payments or skipping payments can result in defaulting on student loans. This is where consolidating loans makes everything a little easier and more doable. When consolidating loans, a graduate goes from paying multiple monthly payments to different lenders, to making a single payment per month, to one lender. Consolidating allows graduates to keep better track of their payments therefore, avoid falling behind on loan repayments and pay off loans in a timely manner.
Getting Out of default
When borrowing money for school, it is very important to understand the terms of your loans because it varies from one lender to another. Each student has a specific payment plan that is established and is unique to them. However, there are times when a graduate defaults on their student loans before they even make a dent in it. This could be due to many factors:
– Couldn’t afford the payment plan.
– Didn’t have enough time to pay it off.
– Missed several payments (intentionally or otherwise).
Defaulting on student loans has an enormous impact on what you can borrow in the future, for school or otherwise. However, if a graduate falls into the trap of defaulting on their student loans, loan consolidation is one way to get out of it. By consolidating their loans, graduates have the ability to go back to being “current” on the repayment plan, which opens windows of borrowing money for future needs.
Improving Credit Score
One of the positives of acquiring student loans is that a graduate with no established credit can start building their credit score. However, missing payments or defaulting on loans can have a negative impact on your credit score and further more, cause unseen financial troubles down the line. Since consolidating student loans often result in the decrease of payment amounts and sticking to a on-time monthly payment, it can help improve your overall credit score.
Student loans have become a growing necessity in our nation. Therefore, knowing your repayment options, like student loan consolidation, is extremely important. Be informed and draw out a plan to be one-step closer to being debt-free.