Credit Card and Loans

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Loan consolidation converts multiple debts into a single manageable loan. Many debt relief companies provide the service of loan consolidation. But, the positives and negatives need to be pondered over properly before deciding whether or not to consolidate your loans.
 

ADVANTAGES:

§ Having all the loans under the same Social Security Number (S.S.N.) in turn helps you in lowering the interest rate on the accumulated amount and thus the total amount to be paid back is reduced.

§ Consolidation also helps to unify many monthly payments into a single one. This will help you manage the payments easily and effectively.

§ Apart from the benefit of having one large loan instead of many, the loan can be extended too.

§ The interest rate on the consolidated loan is also fixed and thus it does not change during the course of the loan.

§ A student with a consolidated loan does not need to spend time keeping track of the payment schedule for two, three or more loans as one can just make a single monthly payment. Often the student elects to make that single payment through an automatic debit.

§ You also get a chance to improve your credit score by consolidating your loan that can fetch you fresh loans in case of emergencies.

§ There is no fine charged if the installments are not paid on the right date.

DISADVANTAGES:

§ The disadvantage with consolidating loans is that you have to begin making your payments right away, when you consolidate student loans during your initial six-month grace period. This can be difficult if you have not found a job after graduation, although you can wait until just before the grace period ends to consolidate, and still receive the lower rates.

§ Furthermore, once you have consolidated your student loans, you cannot un-consolidate them again.

§ These are secured loans and thus require something that the recipient owns as collateral for the loan.

Just so the high cost of university tuition does not prove to be a hindrance in the academic life of a brilliant mind, student loans come forward to the rescue. Student loans comprise of the total amount of borrowed money from a financing source or company to pay for university tuition, books and living expenses. These are designed specially to fit the schooling needs of the student and aid in the completion of the education of the student and thus helping to lay a strong professional foundation. Student loans gain relatively lower interest than most of its counterparts.

Basically, there are two sources of student loans; either from the government or private lenders.

Federal student loans supply financial help for students enrolled at schools that participate in federal aid programs. These loans are provided by the US. Department of Education through the Federal Direct Student Loan Program (FDLP). There are three main types of federal loans-

* Federal Stafford Loan – the basic building block of most students’ financial aid packages. Students using Stafford Loans can typically borrow a significant amount of money regardless of their financial need, for both undergraduate and graduate school programs. The interest rate and terms for Stafford Loans can vary depending on whether the loans are subsidized or unsubsidized.

* Federal Perkins Loans – Perkins loans are awarded to students based on extreme financial need, and usually have very low interest rates. The total funds available to be disbursed for these loans is limited, however, which means that the amount of the loan will likely be relatively low.

* Federal Plus Loans – These loans are available to parents whose children are attending college as full or half-time undergraduate students. They are awarded based on credit history and cost of attendance. The interest is low on this type of loan, but repayment usually begins within 60-90 days after full disbursement of the loan, or after the student graduates.

A private student loan on the other hand is offered through a bank or another lending institution. It is not available through the school. The government does not subsidize it and it does not have the same guidelines as a Federal loan does in regards to interest rates and repayment options.

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