Student loan consolidation interest rate decisions are highly important, as they can make the difference of hundreds, or even thousands of dollars in loan payments over the term of the loan. In order to make the best selection, the borrower needs to understand the difference between a fixed rate student loan and one with a variable rate. The goal of this guide is to provide the basics of understanding fixed rate student loan consolidation.
What is a Private Student Loan?
Private student loans are loans for college, or training school, which are not backed by the U.S. Federal Government. As such, the interest rates on students are generally a bit higher than federal student loans.
In addition, the payment terms of a private student loan are typically different than those of federal programs. For instance, in many cases the borrower must begin paying the student loan back immediately. When it comes to qualifying for a private loan, the rules differ there as well. In most cases, either the borrower must be credit worthy, or have a credit worthy co-signer for the loan. On the other hand, federally backed student loans don’t always rely on the borrower’s credit.
Why Consolidate Private Student Loans?
While in school, the borrower normally must take out a separate loan for each school year. As a result, by the time they finish school they have multiple loans, with sometimes differing terms. The loans may also be for multiple lenders. These circumstances make the borrower more likely to default. Student loan consolidation lenders can help with this.
In order to cut down on the number and amount of monthly loan payments, consolidating student loans is typically the best option. Doing so leaves the borrower with one payment to a single lender each month. Certainly this is a lot less hassle than having to pay multiple lenders varying amounts each month.
Fixed Rate Student Loan Consolidation vs. Variable Rate
Most private student loan consolidation lenders advertise variable rate loans. However, many of them also offer fixed rate consolidation loans as well. So what’s the difference?
With a variable rate loan, the interest rate charged on the money owed to the lender is subject to change over the term of the loan. Subsequently, this means that the monthly payment will change if this happens. Conversely, with fixed rate private student loan consolidation, both the rate and monthly payment stay the same. This gives the borrower the advantage of being able to anticipate payment amounts in the future.
How to Locate Fixed Rate Private Student Loan Consolidation Lender
There is an abundance of information available on the internet to help with student loan consolidation interest rate decisions. First shop around for the best rates. Most lenders will give an instant quote, or even a decision online within seconds.
Finally, there is still hope even if the student loan is in default. Lenders will generally work with borrowers who are earnestly trying to resolve the default. For more information, consider exploring the following sources for lists of lenders and other important information:
- Nextstudent.com
- Privatestudentloan.org
- Finaid.org
- Privatestudentloans.com
- Studentloanconsolidator.com
Cheri Pearson - Cheri Pearson is a seasoned freelance journalist who holds a Bachelor's degree in Business Administration from the University of ...
