There are a number of things that you need to know about student loan consolidation rates. To start with, the loans are advanced based on whether you are taking the federal or private student loan. Since you cannot consolidate both, you will need to know how each of them operates.
The federal student loans have an interest rate that is determined by the weighting the average of the multiple federal student loans that you have taken, For instance, if you have 4 loans at rates of 3.5%, 2.1%, 3.4% and 4.1%, to get the rate, the 4of them are weighted by adding the 4 of them by adding and dividing with the number of loans. You will get the average weighted rate of interest.
This type has the advantage of the fact that you do not need a high credit score as pre-qualification for the loan. Another advantage is in the fact you will get the loan at fixed rate of interest which is usually what the government avails to the students. This essentially means the rate is not affected by the fluctuations in the market. The federal loan consolidation rates are capped at 8.25% and this does not change throughout. Initially, the rate of interest may seem high but you will realize that it makes a lot of sense to take up the loan.
Private student loan consolidation rates on the other hand are dependent on the credit score of a student .this type of loan operates principally on the strength of ones balances. If you have healthy balance, you will get reduced interest rate for instance if you have a FICO score of 660. The loan is based on the variable rates of interest which changes depending on the market. For instance, the interest could be at 2.3% and then after sometime, it could go higher or lower.
The advantage with the private student loan consolidation rates is that you will be able to save a lot in dollars when the rates dip. However, it could also mean that you pay high interest rates when the interest goes up.
This type of loan is a little bit difficult to consolidate since you must have a certain credit score. Essentially, those with low credit scores do not meet the pre-condition. This is indeed a limiting factor for those who don’t meet the cut.
The co-signet to the rescue
In both cases, you will find that the co-signer will be released after a pre-determinate period of time which is usually after 12 months or 1 year. This is indeed good news to those with many kids and wants to open accounts for them. The 1 year is not a long period of time to wait especially if you know what you stand to gain.
The upshot is that the federal and private student loan consolidation rates revolve around the variable and fixed rates of interest depending on the type loan that you will be taking.