Consolidate Your Student Loans

Personal loans are tricky - you never can quite make out whether it is absolutely necessary or if it is just a luxury you will be paying back for the next few years. That new computer, or that credit card outstanding, or the house refurnishing...the need for personal loans is never ending. We give you the best tips and knowledge on personal loans here; we also believe that you are better off knowing that there are other options out there - loan against property or car refinance spring to mind.

That done, you will find all you need to avail a personal loan in this section. How to apply for one, repayment options, charges applicable, documentation required, all these aspects are covered in this section.

A personal loan can make a real positive difference in your life. It can also make a real difference in your finances. Apnaloan.com gives you all the expertise we have so that you have the maximum of the former and the minimum of the latter.

The irony of the situation here is that every borrower seeks a loan with lowest interest rate whereas every lender with highest interest rate. Risk perception is different in case of different borrowers and ideally is determined from their credit history. Till now we noticed that banks had only their own experiences with customers to fall back on for their assessment. But this is changing now with the entry of agencies that assess the creditworthiness of people.

Need for credit score?

Credit score provides a speedy and objective way to assess risk. This way, financial institutions, lenders and banks can analyze a loan or a credit card application in a speedy manner without having to make complex calculations each time. Instead they have scales that ponder the applicant's standing with several predefined loan or card models and they define the product's variables by matching the rank to the models. Hence, they can easily state in a matter of minutes how much you can borrow, for how long and at which rate, etc.

Credit Score: What is it?

Credit Score comprises of factors like payment history (including any late payments or missed payments that will affect your score negatively), credit card balances (that will be taken into account when the loan amount is determined), bank accounts (including savings and checking accounts) and any other form of credit including all outstanding personal loans, mortgage loans, store cards, etc.

Credit score is simply a number, it is not standardized and each lender, financial institution, risk analyst, etc. can have its own. This number reflects a level of risk that defines whether it is advisable or not to lend money to someone and thus, how much interest should one charge in order to compensate for that risk. The number is created based on inputs from the credit report. Entries from past will be pondered and assigned a value, the summing or deductions of those points will define the credit score.

Even though there is no standardized model of scoring, usually there are many similarities between the models of lenders that deal with the same type of loans, a mortgage lender and a car lender will probably use different scoring models because the risks associated with these two transactions are significantly different.

Your credit score will fluctuate according to the inputs on your debt history that are reflected in the report. Each timely payment will be recorded as a positive input, while late payments or missed payments will impact negatively on the records thus reducing the score count. Though each lender will calculate the grade in different ways the source of information that they will use is the same and thus, one should manage to keep credit report clean, then grade will surely remain in a good stance regardless of the lender.

Some banks give 100 per cent finance on car loans. The truth is that this interest rate is only available to people with perfect credit score. Most people with average to low credit score will have to pay higher interest rates.

Which agency is doing this job of maintaining your credit score?

Now lending banks can source your credit score from Credit Information Bureau (India) Limited (CIBIL), to supplement the information you furnish in your loan application.

Say if you default on a loan from one bank, it will bring down the credit score, which any other bank that you go to will also be privy to. It will determine not only whether you can get a loan, but also the rate of interest you pay on it. So it is important to learn how to keep the credit score high.

Nevertheless, always watch credit score closely and avoid damaging credit history with late or missing payments, too many outstanding loans and too many loan requests. Credit score is the indication of financial health and even when sometimes it can't get a better credit score, if it drops too much the application could be declined.

Both federal student loan consolidation and private student loan consolidation offer the benefit of a significantly lower monthly payment and simplified finances. If you want to consolidate student loans, begin with your federal Stafford, Parent PLUS, Perkins, and all Federal FFELP andFederal Direct Loans that were taken out for your education. Private student loan consolidation is a separate program that allows you to refinance all non-federal, education related debt.

Even if you can make the monthly payments from your original school loans, you may still want to consider consolidating to lower your payments and free up money for bills with higher interest rates. These include credit cards and personal loans, neither of which have tax-deductible interest.

Borrowers Currently Enrolled in school can no longer Consolidate Their Loans

The Higher Education Reconciliation Act of 2005 eliminated the provision that allowed a FFEL or Direct Loan borrower who is enrolled in school on at least a half-time basis to request to enter repayment early on his or her Stafford Loans if the lender approves. Repayment is now defined as not beginning until 6 months and one day after the date the student ceases to carry at least one-half the normal full- time academic workload, as determined by the school. Therefore, a FFEL or Direct Loan borrower who is still enrolled in school at least half-time may no longer request to enter repayment early to apply for a FFEL or Direct Consolidation Loan.

To apply for a Direct Loan Consolidation or an FFEL Consolidation the borrower must contact the lender and complete an application.  Most lenders provide borrowers with the ability to apply on-line or request an application over the telephone.  Once an application is completed and submitted, the lender will request information from the borrower’s other lenders or from its own system to determine the amounts outstanding on the borrowers loans.  The borrower will then receive notification about the consolidation loan, normal consumer disclosures, the amount owed, and if appropriate, where to make payments.

FFEL Consolidation Loan Weighted Average Interest Rate

Consolidation loans have fixed interest rates that are based on the weighted average of the interest rates on the loans being consolidated. A lender can provide a new consolidation loan borrower with the lowest statutory weighted average interest rate for loans by using the lower of the weighted average of the interest rates on the loans being consolidated as of July 1 or the date the lender received the borrower's consolidation loan application. The lender should apply a consistent method of determining when an application is received.

Most federal education loans are eligible for consolidation, including subsidized and unsubsidized Direct and FFEL Stafford Loans, SLS, Federal Perkins Loans, Federal Nursing Loans, and Health Education Assistance Loans. PLUS Loan borrowers (parent and graduate/professional degree students) can also consolidate their loans. Private education loans are not eligible for consolidation.