Student loan balances recently surpassed credit card debt for the first time in history, with young adults graduating with an average of $24,000 in loans. Under so much financial pressure, some may consider loan consolidation. Before taking that step, however, it’s important to weigh the pros and cons.
1. Consolidation allows you to lock your loans into one low rate that will not fluctuate over the years.
2. You can manage your loans more easily with one monthly payment to one lender.
3. Loan consolidation may help boost your credit score by lowering the number of open accounts in your name.
4. You may receive favorable rates if you meet certain conditions, such as making on-time payments for a pre-determined amount of time.
1. Consolidation loans may extend your repayment period to between 10 and 30 years, meaning you will pay more in interest over the life of your loan.
2. Qualifying for a consolidation loan can be difficult and you may need to meet certain balance and lending requirements to be eligible.
3. You may miss out on other more affordable repayment options. Government programs, volunteer organizations and public service employers may provide forgiveness plans or repay a portion of your debt in exchange for your services.
You have a number of student loan repayment options, so make sure you do your research and understand the pros and cons of each choice before you make a decision.
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