10 Questions to Ask Before Students Loan Consolidation

Refinancing student loan or students loan consolidation may refer to the replacement of an existing debt obligation (student loan) with another debt obligation (student loan) under different terms.
Refinancing your student loans is a good strategy to manage your student loan repayment situation and improve your financial health.

Although student loan refinancing can be confusing if you didn't take the right decision and it may lead to financial problems.

READ: what is student loan consolidation?

10 Questions to Ask Before Students Loan Consolidation

These are questions you need to ask before under-going any students loan consolidation!

1.) What is the term of the refinanced student loan? 

Term means the expected amount of years in which you are expected to repay your loan. Banks offer 5, 10, 15, and 20 year repayment terms. What to keep in mind is how much you can afford to pay now, and how much interest you will accrue over the lifetime of repayment.

2.) Does the new student loan have a variable or fixed interest rate?

 Any student loan is either variable or fixed interest rates. Student can convert a variable interest rate to a fixed interest rate loan or vice versa by refinancing it. Fixed interest rates are less risky, and variable interest rate loans fluctuate.

3.) What are the repayment terms?

 What will my monthly payments be? When does the repayment start? How do I pay? What fees can occur if I miss a payment or default on my student loans?

4.) Is there an origination fee?

 The origination fee is usually added to the loan amount due. Up to 2% of the total amount you are requesting to be refinanced are being charge by some bank as origination fee. For instance, if you refinance $80,000 in student loans, you will pay a $800 for a 1% origination fee.

5.) Will they combine federal and private student loans?

Some financial institutions are refinancing federal and private loans bundled together. It help you to get a lower interest rate to save money, care must be taken not to lose most alternative and flexible repayment plans associated with the federal government loan program

6.) Do I need a cosigner?
Do you offer cosigner release?

 With very low income or credit score, the bank might require a cosigner to insure your student loans in the case of default. Some bank offer cosigner release, which releases any existing cosigners from your student loans.

7.) What are the typical credit score, salary, and debt-to-income requirements?

 Be sure to ask the credit score requirements of a bank before submitting your application.

8.) What are the maximum amounts of debt they will refinance?

 Banks have a maximum amount of debt they will refinance which varies by bank and student education level, such as undergraduate, graduate, etc

9.) Do they refinance student loans from my school or my degree program?

 Ask to know which schools are eligible for the refinancing product. Since some banks don't lend to student loan borrowers who have attended for-profit private institutions, community colleges, or certificate programs.

10.) What type of support and customers service does the bank provide?

 This is the most important question you may ask your banking partners. As some banks provide terrible customer service. Consolidating your student loans means that you will be working with this bank for the next 5-20 years. Absolute care must be taken before refinancing your student loans.

READ:    10 Questions to Ask Before Students Loan Consolidation

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