Debt consolidation combines multiple loans into one bigger loan amount from a single lender. That big loan pays off all your individual loans, so you just have one monthly payment to make. Your debt consolidation service may also offer alternative repayment plans that make your monthly bill more affordable.
If you currently have federal student loans that are with different loan servicers, consolidation can greatly simplify loan repayment by giving you a single loan with just one monthly bill. Consolidation can lower your monthly payment by giving you a longer period of time (up to 30 years) to repay your loans.
Consolidation is similar to refinancing a loan. You can consolidate all, just some, or even just one of your student loans. Consolidating federal student loans may be a good strategy to lower monthly payments or to get out of default, but it is not always a good idea. ... Interest rates for consolidation loans are fixed.
You can consolidate federal student loans for free with the Department of Education at studentaid.gov. If you want to consolidate — or refinance — your loans with a private lender, apply directly on the lender's website.
The smartest strategy to pay off credit card debt is through credit card consolidation. When you consolidate credit card debt, you combine your existing credit card debt into a single loan with a lower interest rate. With a lower interest rate, you can save money each month and pay off debt faster.
Trying to consolidate debt with bad credit is not a great idea. If your credit rating is low, it's hard to get a low-interest loan to consolidate debts, and while it might feel nice to have only one loan payment, debt consolidation with a high-interest loan can make your financial situation worse instead of better.
Federal consolidation doesn't incur a credit check, so it won't hurt your credit score. If you qualify, consolidating federal loans also gives you the freedom to get on an income-driven repayment plan or extended plan, which could make your monthly payments more affordable.
The biggest drawback of refinancing your student loans is giving up the protections that you otherwise receive with federal loans, such as income-driven repayment plans.
Keep in mind, however, that consolidating loans may reset any progress you've made toward relief like Public Service Loan Forgiveness. If you consolidate federal loans through a private service, they are not eligible for relief under the Student Loan Forgiveness Act, or for any currently available relief.
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