Tuesday, March 1, 2011

Financing Your Private education

As you finish a university degree, the subject of private education loan consolidation may become important to you. When you get student loans, or education loans as some call them, you may find that you have several. And private student loans can bite more than Stafford loans or even PLUS Grad loans.

How can you consolidate these?

You have a couple of options. Private education loan consolidation means that you combine the loans into one larger loan.

You have 3 goals in doing this:

1. Lower Your Payment

Everyone wants a lower payment. If you can combine the private student loans you have, you can often get a lower payment. Getting a lower payment means you get a lower interest rate or a longer payback.

2. Lower Your Interest Rate

Decreasing your interest paid will always help pay loans off faster, which is a good thing. Often a bank will offer a lower rate in order to get more of your business.

By combining loans from different banks, you can get a better deal and a lower rate.

3. Lengthen Your Pay Back Terms

Yes, paying back for 20 years will lower your payment versus 10 years. But you will pay more to the bank in the long run doing it this way. Still, if you need a lower payment in order to fill the fridge, longer payback will often do the trick.

How Do You Consolidate?

With private education loan consolidation, you generally start with your current lender. If you have more than one, you can call all of them.

Several large banks do have a student loan consolidation program. For example, Wells Fargo, and NextStudent work in the student loan market. Sallie Mae plans to start offering private consolidation loans soon.

Take time to compare your options. You don't want to agree to a bad loan with a high rate. Be sure you have a real quote, and if your loan paperwork doesn't show the rate you were promised, find out why.

To finalize the paperwork, you will have to give your social, and you'll have to sign some papers. Be sure you know how many payments you have to make, and how much the payments are.

One Thing You Must Do

Also, be sure that you have a fixed interest rate loan. Variable rate loans favor your bank. In times with high interest rates, you will pay much more. Lock in a fixed rate, and your payment won't change over time. You can plan on it always being the same.

Other Tips You Can Use

Some companies also offer discounts to your interest rate if you make all of your payments on time for a few years. Usually this amounts to 0.25 percent. Not much, but still helpful.

You can also get a similar discount at some lenders by letting the lender debit your account. If you feel comfortable with this, it can save you another quarter percent off your interest rate. And for this one, you don't have to wait for a few years.