As more jobs call for a college education, more people are finding themselves with student debt and wondering about debt consolidation. The price for college is rising, and people are looking for a way to alleviate the pressure of their student loan repayment. There are many ways for people to get out of debt, and consolidation is one of the more popular options. There are certain things that people should watch out for, however.
First, it is important to look at what debt consolidation is. Consolidation is not getting rid of debt. In fact, consolidation is the step of taking what you owe, lumping it all together, and making payments on that. When consolidating debt, a person takes out one loan to pay off their other loans. These loans are often given at a lower interest rate than the initial loans that the person is looking to pay off. While there are different ways to consolidate debt, a person should consider a few different things when consolidating student loans.
When consolidating student loans, it is necessary to understand what it is exactly that someone is paying for. While a person can consolidate their debt on their own, without paying for it, these companies will do it for them. That being said, there are ways for people to do the consolidation for themselves. With a Federal student loan, a person can get a Direct Consolidation Loan. This is available free from the government. For a private loan, there are more options, but all of them are free. Some people, though, are willing to pay to have these things taken care of, and there are different ways to do that.
Checking with your bank is a good first step when researching consolidation plans. If a person has a relationship with a banking institution, they may be more willing to work with a person and help them with their consolidation. Working with a bank can have other benefits, too. A study was conducted by the Wall Street Journal on how student loans effect the purchase of a home. This study shows that while having student loans doesn’t necessarily hurt people buying a home, it may not help, either. Working with a bank could set up a relationship with the institution that could be beneficial when it comes time to taking out a home loan. It is imperative to remember, though, that the amount of loans a person has out could effect whether or not a person will receive a home loan.
Getting a college education has become one of the most important building blocks to setting up a successful future, but this does not come cheap. With loans, this cost can be deferred, but not erased. Keeping track of debt is incredibly important, and keeping one’s self ahead of the game when it comes to debt is vital. Looking into debt consolidation is a worthy cause, but a person needs to be knowledgeable about their options. By educating themselves, taking stock of their options, and doing what works best for them, a person can lower their payments and make their way in the world.
By Bryan Levy