Private Student Loan Consolidation

Posted by Tom Jackson on July 29th, 2017

Private student loan consolidation is your best bet to lower your student loan interest rate and your monthly student loan payment.

Here is what you need to know so that you can ace private student loan consolidation.

What is private student loan consolidation?

Private student loan consolidation, or student loan refinancing, is a tool that student loan borrowers can use to obtain a new student loan at a lower interest rate.

With private student loan consolidation, you use a new student loan at a lower interest rate to pay off your current federal student loans and private student loans that have a higher interest rate.

While the federal government does not offer private student loan consolidation, there are several private lenders who will refinance student loans for student loan borrowers.

Let’s look at how private student loan consolidation works.

Private Student Loan Consolidation: Loan Terms

There are several key loan terms with private student loan consolidation.

You should choose the loan terms that work best for your personal financial situation.

1. Private Student Loan Consolidation:Interest Rate

With private student loan consolidation, the lender determines your interest rate.

Unlike federal student loans, in which every borrower receives the same fixed interest rate, private student loan consolidation can lead to different interest rates depending on your credit profile.

Private lenders may evaluate your credit score, income, current amount of student loan debt and other debt, and your general history of financial responsibility.

Private student loan consolidation rates can start as low as 2.5% - 3.0%.

2. Private Student Loan Consolidation:Loan Term

The standard loan term for a federal student loan is 10 years.

With private student loan consolidation, you can choose your loan term. Your loan term if how long you would like to repay your student loans.

Typically, with private student loan consolidation, you can choose 5-20 years.

The sooner your repay your student loans, the more interest you will save on your student loans. However, your monthly student loan payments will be higher.

The longer your take to repay your student loans, the more interest you will pay. However, your monthly student loan payments will be lower.

3. Private Student Loan Consolidation:Fixed Interest Rate vs. Variable Interest Rate

Private student loan consolidation is flexible and allows you to choose either a fixed interest rate or variable interest rate.

Fixed interest rates tend to be higher than variable interest rates, but they never change due to movements in interest rates. Therefore, with a fixed interest rate, you will pay the same monthly payment over the life of your student loans.

Variable interest rates are lower than fixed interest rates, which can allow you to save money in an economic environment in which interest rates stay stagnant or are cut by the Federal Reserve.

4. Private Student Loan Consolidation: How To Get Approved

You can apply for private student loan consolidation entirely online, and can get your new interest rate in two minutes.

The best candidates for private student loan consolidation are those with strong income (>,000) and high credit score (typically 700+) and currently employed.

Overall, with private student loan consolidation, lenders want to ensure that you can pay off student loans and also pay for life’s other expenses.