Are there any disadvantages to getting a consolidation loan?

YES, there could be.

Consolidation is used as a debt management tool and is ideal for those who are having difficulty making their monthly payments. It is designed to extend out your loan terms and minimize your monthly payment. Because of the additional years, consolidation may significantly increase the total cost of repaying the loan due to the additional amount of interest which will accrue.

Another possible disadvantage is you may lose out on borrower benefits such as interest discounts and rebates that your current lender provides. Many consolidation lenders do not offer these benefits.

And finally, you may hit the consolidation market at the wrong time. If you happen to consolidate your federal loans when the interest rate is high than you are stuck with that rate. You can not consolidate your loans again at a later date should the interest rate drop. You are stuck with the rate at the time of your consolidation. It is not like refinancing a mortgage where you can refi an infinite amount of times to try and score the best interest rate.

By David E. Bonvie

Does Consolidation hurt my credit?

NO. How bout that? You just read the world’s shortest blog. I may be a man of few words, actually just one word, but my words are even more powerful than the semi-popular teenage alien superhero duo of Zan & Jayna. That’s right, the Wonder Twins! Actually, by boasting about my one word blog I have now far exceeded that loneliest number, darn!

Consolidation is merely shifting your loans from piles A, B, and C and condensing them into pile D. That doesn’t hurt your credit at all, in fact in many cases it helps because your monthly payment is a lot lower after consolidation and your credit report will reflects a Paid status next to each loan involved in the consolidation which adds points to your FICO score.

Now if you were to do a debt settlement where a third party was involved in negotiating your amount of debt down, than that could impact your credit negatively. Instead of a Paid status it would carry a Settled or Settled for Less than Full Balance status.

By jrudy

Student Loan Debt Grows

I became a father for the first time earlier this year which was the best moment of my life. Every decision I now make is with Barrett (featured to the right) in mind, which includes going back to school. I’m currently enrolled in classes with the aim of bettering myself, providing a better life for my family, and becoming a more well rounded person. I want to add to our countries GDP numbers. The only problem is my loan volume from school is now skyrocketing upward like a five star Sarah Palin wardrobe.

Did you know the average college graduate carries more than $20,000 in debt? That is a 6% increase year over year. When you combine that with starting salaries for recent grads, which only rose by 3% over that same time period according to the Project on Student Debt, it’s even harder for students to repay those sizeable loans. Of course many students have been unable to land jobs at all and have been forced to place their loans into forbearance where more interest will accrue inflating that total payback number.

It’s really an interesting dichotomy. Go to school and be in debt thousands vs. entering the work force right away with no debt at all. They both have pros and cons but the long term benefits and typical salaries for those with an education will far surpass those without – even when debiting the loan cost from the bottom-line.

To help make those monthly payments more affordable you may want to consider consolidation. Consolidation extends out your loan term and helps minimize your monthly student loan expense. There are also no prepayment penalties so if you have extra money to put toward your loan you can do so at any time.

I know consolidation is going to be in my near future when I graduate. That way I’ll be able to afford my loan payment each month and still buy that new bike for Barrett!

By David E. Bonvie