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Jan-5th-2011

Consolidating Student Loans – What Is The Best Timing?

When a student has graduated from the college, the usual situation is that he or she has quite many debts from the different lenders. This is the time, when consolidating student loans can really be tempting, because the financial benefits come so quickly.

By consolidating student loans a graduate can reach two major benefits. He can get one loan instead of several and one creditor instead of several, but also lower interest rate and if he or she wants, the longer payment time. The whole process depends on the financial plan, which a borrower has for his life.

1. The Fixed Interest Rate.

The best timing for consolidating student loans is, when the economy is in a recession. Then the interest rates are lower and the lenders make good offers to win more business. If a borrower succeeds to make a deal about a long term, low rate loan, which has a fixed interest rate, he may have done the deal of his life.

2. How To Improve The Credit Score?

Before a borrower sign anything and already in the early phase of the process, it is smart to look the credit score for a while. If there is many credit card debts, several student loan debts and especially, if a borrower has not paid the payments in time, something should be done.

The first thing is not to take any new loans, the next thing is to pay away the old debts, if a borrower can. If a graduate has started to work permanently, it will improve the ratings further. After a borrower has cleaned the credit score and he has a new, improved report, it is a right time to make the application.

3. The Payments After The Consolidation.

When a borrower has consolidated the loans during the grace period, within six months after the graduation, he has to start the payments immediately. To reduce the risk a graduate can do the consolidation just before the grace period will end.

4. The Interest Rate Will Be A Fixed One.

This may sound not so smart, but the fixed rate has also big advantages. The biggest one is of course, that it will not bring any surprises and it can happen that the variable rates will increase above the fixed one. Then the loan will be a smart move.

5. Additional Benefits.

If a borrower uses the online payment, the credit can deduct 0,25 % from the rate. If a borrower has an automatic deduction from the bank account, the same thing. Also when a borrower pays in time, the lenders will drop the rates. And you can always pay the loan earlier, than agreed.

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