Loan Consolidation

Written by Nicole Madison
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There are many common myths when it comes to student loan consolidation. Often these myths have the ring of truth and are discussed so much that people begin to view them as facts. To ensure you make the right financial choices, it is important to differentiate the facts from the myths.

Loan Consolidation Myths

One common myth about loan consolidation is that you cannot consolidate student loans until you graduate or leave school. This is not completely true. The fact is you can consolidate while you are still enrolled in school by requesting to have your loan put in repayment status early.

In addition, if you are a student in graduate school you can consolidate the loans you signed for as an undergraduate. If you are currently enrolled in a medical, law, or other postgraduate school you can consolidate both your undergraduate and graduate school loans. Furthermore, if you are close to graduating from graduate school and you have already consolidated your undergraduate school loans, you may be able to consolidate your undergraduate and graduate loans into one loan.

Another common loan consolidation myth is that you can consolidate your student loans only once. In fact, if you have received a new eligible loan since your first consolidation you can reconsolidate. You can also reconsolidate if you omitted a loan from your original consolidation.

Many people think loan consolidation is a guaranteed way to save money. This is a myth as well. Although consolidating could save the borrower money, the main objectives of loan consolidation are to extend the term of the loan, provide a lower fixed rate of interest, reduce monthly payments, and make repayment simpler by allowing the borrower to make one payment per month rather than several. By extending the length of time to repay the loan, and thereby increasing the number of payments, the overall cost of the loan could increase. However, many lenders will work with you to find ways to lower your overall loan costs in addition to lowering your interest rate.

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