So you’re done with
school and you have now entered into what they call the “real world”, but you
still have the financial burden of student loans. You've found that dream job,
but most of what you are earning is going to pay off the education you needed
to get here. You decide to consolidate the loans, but is that really the best
thing to do? Yes, and here's why. By
consolidating now you could save hundreds, thousands of dollars in interest
that could be incurred over the years. Interest rates are at
their lowest right now and now is good a time as any to take advantage of that
fact. When you consolidate, you are not only making it more convenient for you
to pay off all your loans, but also lowering your overall interest rates. Make
sure you are getting a fixed rate though, or the interest rate could rise
eventually. Many companies offer very low introductory interest rates, but if
you are not careful you could be stuck with one that are too high in a few years
when the introductory rate expires.
If you are to
consolidate, you will have one lump payment, instead of several smaller ones.
In the long run, this could save you money and let you have available money to
use for more stuff now. For example, how about some new furniture for your
first apartment? Having that cash to put into savings will definitely turn out
good in the long run. Of course you could also use the extra cash to pay off
other debts and be debt free! Now doesn't that sound like a good idea? Besides
making it faster for you to pay off your loans by having one lump payment, it
also makes the whole matter a lot more convenient for you. Having only one
payment, agreement and interest rate to keep track of, should make the whole
process a lot easier.
When you
consolidate, you could be able to earn a lower interest rate. Sometimes opportunities arise in
which you can defer or through forbearance have a chance to make that interest
rate drop even further, therefore having more of your monthly payment go to the
actual principal amount of the loan. This leads to a faster payoff. If you are
lucky enough to find a consolidation that allows for no prepayment penalty, you
could pay off these loans even faster. As you begin to earn more money because
of the education you have received with the use of these student loans and are
able to pay more, you should be allowed to prepay without punishment. Having
this option can bring you closer to being debt free even faster. Besides these
great benefits student loan consolidation can offer you a few tax breaks and
saving you more money. There is a deduction that you can claim whether or not
you itemize. It can reduce the amount of taxable income up to $2,500.
One other thing
that consolidating your student loan can do is raise your overall credit
rating. There's
more than just being able to pay off the debt faster and having your credit
history free of the debt. There is also the fact in the meantime that you will
have reduced the amount of creditors actually on your credit report. The more
creditors you have on your credit report attempting to collect from you the
worse your credit score will appear. But if you are taking to the consolidation
route you will have reduced the amount of creditors on your report down to one.
This will immediately improve your credit rating and then eventually your
credit rating will improve when all payments have been made.
Now that you can clearly
see many of the benefits and advantages of consolidating your student loan
debts, doesn't it seem to make a lot more sense to do it, rather than not? With
so much valuable benefits, including a lot more free cash, easier and more
convenient payments and payment schedules, an immediate positive effect on your
credit rating, tax breaks, lower interest rates, not to mention being debt free
sooner, not consolidating your student loans makes no sense at all. So what are
you waiting for?
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