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Student loan consolidation information brought to you by FindLocalBanks.com


Student Loan Consolidation

If you went to college and used federal student loans to finance your education, you may want to consider student loan consolidation to reduce your interest costs and lower your monthly student loan payments. Student loan consolidation does not require a credit check and the consolidation loan is not subject to any prepayment penalties.

How much are the interest rates for student loan consolidation?
The interest rate for a student loan consolidation is a weighted average of all your student loans rounded up to the nearest eighth of a percentage point. Currently (as of July 2006), guidelines stipulate that this interest rate will be a fixed for the entire life of the loan.

-- Credit Tip by FindLocalBanks.com
Federal law requires that all creditors must state the cost of their credit in terms of an Annual Percentage Rate (APR). This rate takes into account how the loan is repaid on a yearly basis, and allows you to accurately compare the cost of credit among lenders. For example: You borrow $1000 for one year and pay a finance charge of $100. If you can keep the entire $1000 for the whole year and then repay $1100 at yearís end, you are paying an APR of 10 percent. But if you repay the $1000 and finance charge (a total of $1100) in twelve equal monthly installments, you donít really get to use $1000 for the whole year. In fact, you get to use less and less of that $1000 each month. In this case, the $100 finance charge amounts to an APR of 18 percent.

Is student loan consolidation a viable option if I am still in school?
You can consolidate student loans while you are still in school. However, if you do so you will have to begin repaying the consolidated student loan as soon as you graduate -- you will forfeit the 6-month grace period allowed the individual student loans.

What types of loans are eligible for student loan consolidation?
The following loans are eligible: PLUS loans, Perkins Loans, Nursing Loans, Supplemental loans, Stafford/Direct loans (subsidized and unsubsidized).

-- Credit Tip by FindLocalBanks.com
The finance charge is the total dollar amount you pay to use credit. It includes interest costs and other costs, such as service charges and some credit-related insurance premiums. For example: Suppose you borrow $1000 for one year, and the interest is $100. If there is a service charge of $10, the finance charge will be $110.

Are there any restrictions for student loan consolidation?
In order to be eligible for federal student loan consolidation, you cannot be in default on any of your student loans and your student loans must meet minimum dollar amount guidelines ($10,000 as of July 2006). If your student loans do not total $10,000, you may still qualify for a private student loan consolidation. With a private student loan consolidation, you will have to go through a credit check (since the loan will not be federally insured). The interest rate on a private student loan consolidation is likely to have an adjustable rate.


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