The aim of consolidating federal loans is to bring the various loans together to be one. Before you decide to consolidate federal loans, there are a number of things that you will need to be conscious of. To begin with, you should be conscious of the fact that you cannot consolidate both the federal and private at the same time unless you are considering the refinancing option.
Why consolidate the loans?
The truth of the matter is that no matter what you do a student, there is no excuse for you to pay the high interest rates on the multiple loans that you could be paying for. It thus makes a lot of sense to consolidate either of them so the instead of having several loans, you will just service one and get away with reduced rate of interest. How is this possible, you ask?
To start, multiple loans, whether, federal come with varying rates of interest. This basically means that the interest will be high when you imagine that you are handling each of them individually. In this respect, you will be better off with one loan instead of carrying a burden of many loans with variable interest rates.
When you take several of your student loans and consolidate them into one, you will be able to manage the loan interest which could be far much lower than you had imagined. What it means is that lenders are able to handle one loan portfolio at a go as opposed to paying for several of them.
To consolidate federal loans means getting better terms of the federal loan. This is because the loan will be single and will hence come as one instead of several. Your new loan will be under better term from interest to period of repayment.
The risk of reduced monthly payments is that you will have longer terms of payment but with equally higher amount that you will pay the lender. This is not good for someone who is trying to save on the loan amount.
If you are intent to consolidate federal loans, there is no harm but you have to do your homework well. Start with the loan on interest a d compare with the other student loan consolidating companies. The lowest ones will be the best bet yet for you.
The APR should be reasonable enough such that you will have the interest within manageable levels. Only by comparing them will you be able to settle on the one that is more agreeable to in respect to your financial position.
The terms of the loans are very important. Ensure that you get the 5, 10, 15 and 20 in that order. These are the best that you can get as long as you are intending to consolidate federal loans.
The other important part of the loans is that you should get the variable and fixed interest rates which by the way should be pretty affordable.
Lastly, this is ideal for the undergraduate and graduate students.