If you have multiple outstanding student loans, whether or not you are currently making payments, you may be able to lower your payments and gain other benefits by consolidating them into one. Among the advantages, some lenders offer a cash rebate as an incentive to win your business. To find the best programme and determine whether a rebate is a good solution, you must thoroughly research potential lenders. You should also consider whether consolidation is the best overall option.
Part One: Choosing a Consolidation Program
1. Determine who should be contacted. You must shop around before deciding on private loan consolidation. Compare loan servicing companies such as Chase, NextStudent, Student Loan Network, and Wells Fargo, all of which have high ratings from Forbes.
When comparing consolidation loans with different private companies, pay close attention to the interest rate – this will make a significant difference in how much you end up paying overall.
There is no doubt that you are better off consolidating federal student loans with the Department of Education, where interest rates are capped and you retain access to programmes such as deferment, forbearance, and forgiveness.
2. Last but not least, check with your own lender. After you’ve shopped around and discovered the best deals available from other lenders, contact the bank or servicing agent who handles each of your current loans. Find out if they will match or beat the prices you found. Because your own bank has an incentive to keep your business, if the offers you’ve found are reasonable, your own lender may be willing to offer you something a little better.
3. Inquire with your lenders about the possibility of receiving a rebate for consolidating your debts. Lenders will typically advertise the incentives that they provide in order to gain your attention and business. However, you may still need to inquire. When you find a lender that looks promising and an interest rate that you believe you can afford, find out if they have a consolidation rebate programme. Ask yourself the following questions:
Is there a discount for consolidating student loans?
Are your loans eligible for the rebate?
Is the rebate a set amount or a percentage of the total amount of your loans?
How much money can you get?
Is the rebate given to you in cash, or can you only use it to deduct the loan amount? (While some lenders advertise a rebate programme, the rebate is only available as a loan deduction.)
4. To choose a consolidation programme, compare the offers. Keep track of the programmes you discover as you speak with different lenders. You should compare the interest rates, the length of the consolidated loan, and the specifics of any incentives they provide. There is no single formula that can be used to determine the best offer. You must decide what your primary goal is in consolidating. If you are primarily concerned with lowering your monthly payments, you may not be as concerned with the overall length of the loan. However, if you want to lower your total payment, you must compare both the interest rate and the total length. Finally, if you are looking for a rebate to “earn” some extra cash in your pocket, you must consider the amount that each lender is offering.
Each lender’s agent should be able to assist you with the comparisons. You should be able to ask the agent, “What would the total cost of the consolidated loan be?” and the agent should be able to quickly calculate that for you.
5. Make your choice. You only need to make a decision after comparing all of the data. Select the consolidation programme that best meets your requirements. This is the loan that will generate a monthly payment that you can afford while keeping the total cost within a range that you are comfortable with. If the rebate is important to you, go with the lender who offers the best rebate.
Understand that while some rebate offers may appear appealing at the time, a lower interest rate offer may end up saving you much more money over the life of the loan. You have a choice.
Part 2: Filling Out the Paperwork for a Rebate
1. Read the small print. Once a lender receives your signature on the loan contract, the lender’s incentive to assist you may be lost. To complete your rebate, you must carefully read the contract and adhere to the detailed instructions. In order to claim your rebate, you must usually fill out some paperwork and submit it to a government office.
You may be disqualified from receiving your rebate if you do not submit the paperwork on time. Your loan consolidation will still be completed, but the rebate will no longer be available.
2. Inquire with your lender about how to claim your rebate. If the contract is unclear, or if you have any questions, you should be able to contact the agent and inquire about claiming your rebate. You may be required to fill out a form or create an account online.
3. To earn and keep your rebate, you must fulfil your obligations. Some programmes will only issue a rebate if you meet certain criteria. Typically, this is linked to loan payments. Whatever the condition, you must first comprehend it and then meet it. Even a minor, seemingly technical omission can result in the loss of the entire rebate.
For example, one loan programme offers a cash rebate of 1.5 percent of the loan amount when you apply for the loan. The condition, however, is that you make the first twelve monthly payments in full and on time. If you miss even one payment or are late at all, the rebate amount is applied back to the loan.
Continuing with that example, suppose you borrow $40,000 from a bank. At the time of the loan, you would receive $600 in cash. However, you would be required to make all of your monthly payments on time. If you miss one, the $600 will be deducted from your loan. As a result, your rebate would be forfeited.
Part 3: Determining Whether Consolidation Is a Good Idea
1. Gather all of the information you can about your student loans. Stafford, Perkins, PLUS, and other federal loans may be combined. You may also owe money on some private loans. Many borrowers are unaware of the amount they owe. Collect all of your records and create a list of all of your loans. Write down the names of the lenders as well as your monthly payments, whether or not you have been making them.
The National Student Loan Data System can provide information about your federal loans at https://www.nslds.ed.gov/npas/index.htm. You will be able to view all of your federal financial aid records on this website.
If you have any questions about your private loans, you should contact the lender directly. Inquire about your outstanding balance as well as documentation about the terms and conditions of your loans.
2. Take a look at your current financial situation. Once you have an accurate and complete list of the loans, go over the information to see if consolidation would be beneficial. Ask yourself honestly whether you can make your payments on time and if you can afford them. If any of your payments are past due, consolidation may be a good option. If any of the following situations apply, you may need to consolidate your loans:
Your federal loans are in arrears. This means you haven’t made a payment in 270 days. Consolidation will take them out of default and have less of an impact on your credit rating.
You are behind on your private loan payments and are unable to catch up. Consolidation will assist you in getting your debt under control while minimising long-term damage to your credit.
You’re making payments, but you don’t think you’ll be able to keep doing so. If you are concerned about becoming delinquent or defaulting on your loans in the future, consolidating them may help you get a lower monthly payment so that you can keep your loans current.
You want to simplify the process of making multiple monthly payments on various loans. Consolidating your loans will make the process easier because you will only have to make one payment to one lender rather than multiple payments to multiple lenders. You cannot combine private and federal loans, so if you have a combination, you will have two payments. However, this may be an improvement.
3. Recognize the drawbacks of consolidation. Consolidation is not always the best option. If you consolidate to lower your monthly payments, you may end up making those payments for a longer period of time. In the end, you might end up paying more overall. You should also consider the following:
As a service fee for the consolidation, a fee of up to 18.5 percent of your loan balance may be added to your principal on private loans. If you owe $20,000, for example, this equates to a $3,700 service fee.
Your interest rate may rise. Federal interest rates are legally limited, but even this limit is quite high, especially when you consider that you could be paying for decades.
Benefits associated with specific loans may be lost. If you are consolidating with the intention of receiving a rebate, you must carefully read the loan. Consolidating loans results in the creation of new loans in place of the original ones. Any benefits or special terms you had with the original loans may be lost. You should carefully ask the lender if you are still eligible for a rebate after consolidation.
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