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Gather your loans and get a lower monthly cost

Are you presently juggling upwards of five loan payments every month? Although credit is a useful component of today’s economic picture, your personal financial situation can become overwhelming when you need to keep track of how much to pay and when each payment is due on multiple loans. Gathering your loans together, or “consolidating” them, will help you to manage your finances more easily.

Extended loan repayment period, lower monthly payments
If you opt to go the loan consolidation route, the lending institution may offer you the possibility of an extended repayment period. What this means is that you will be allowed to pay off the loan over a longer stretch of time than originally planned.

Although there is a disadvantage in that the total amount you end up paying will be higher, the advantage is that your monthly payment itself will be lower. This is helpful if, for example, you are just starting out in a lucrative profession.

Important points to consider
With loan consolidation, there are several essential facts to bear in mind.

The first is that the terms of your new repayment plan are quite likely to be different from your original loan agreements, so read the contract over carefully before you sign.

Second, once your loans have been consolidated, they cannot be undone and restored to their previous condition. Third, there are no penalties for early repayment of a consolidated loan, so if you are able to pay it off faster than expected, you will not suffer financially.

Third, loans come in two distinct types – public (government funded, also termed “federal,” such as some student loans) and private (auto loans, for instance). Any loans to be consolidated may be combined only with others of the same type.

Consolidation of public vs. private loans
If you choose to consolidate a number of public loans, you may be permitted to repay over a period as long as 25 years. The interest which you will pay will be calculated according to what is known as a “blended average.” That is, the interest rates on all your outstanding loans will be added up and the average of the sum will be the new rate that you will pay.

Gathering up outstanding private loans into one unit works somewhat differently. In this case, the interest rate will not be related to what you were paying previously but will be recalculated. Factors such as your credit score and other indicators of your financial responsibility will be used to determine the rate of interest that you will be required to pay.

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Grace Chen
Grace Chen - Writer & Editor
A graduate of the Haas School of Business, University of California, which is one of the top three (3) business schools in the U.S., Grace Chen has 10 years of experience in this field and have been delivering stellar business content through her written word. She’s the chief editor of Communicate Better and has written and edited thousands of content published in various online and printed media, including the NYSE-sponsored research studies and MEC Global. Connect with Grace on LinkedIn, https://www.linkedin.com/in/grace-chen-9254ab8/