Student Loan Consolidation and Refinancing – Do You Know the Difference?

When it comes to student loan refinancing, word consolidation and refinance are often used interchangeably. But they’re not actually the same thing – each tells a completely different loan process.

Due to the differences, you may find yourself in one direction or the other. You can even decide that the best action is inert (actually possible!).

Student Loan Consolidation

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The so-called direct consolidation loan consolidation is a government program where you can combine various federal student loans as a loan with a single monthly payment. The consolidation loan interest rate is calculated by the weighted average of the rates in the consolidated loans.

Therefore, consolidation does not usually save you money. This is primarily for the convenience of having a single monthly payment. This is why they are considered consolidation loans rather than traditional refinances.

Also, the new loan is likely to have a monthly payment that is the same as your current student loans combined payments. However, you can reduce the monthly payment by extending the consolidation loan period to make the new payment lower and more convenient.

However, by increasing maturity, the interest will be charged for a longer period, which allows you to pay more for the total debt. A big advantage to direct student loan consolidations is that you don’t need a good loan to qualify for the loan. 

You can still be eligible for consolidation, even with fair or low credit, as it is a federal government loan that merges only existing loans. You can consolidate your federal student loans at Student Loans.org through the US Department of Education.

Student Loan Refinance

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Student loan refinance are offered by private (non-state) creditors. You can use it to combine and refinance both federal student loans and private student loans. Although they provide the opportunity to consolidate several student loans as a single loan, they also offer the opportunity to lower your interest rate compared to the average rate you pay in several student loans. And of course, even without increasing the maturity of the credits you will pay at the moment, it can result in a lower monthly payment.

The downside is that you will have credit that will qualify for student loan renewal, which means that your rate will be determined by your credit value as a borrower. This will include a combination of factors including credit history, income, business history, and debt-to-income ratio (DTI). If your credit profile is judged to be less than optimal, it is likely that your interest rate will be higher than the weighted average of your current student loan debts.

Student Loan Refinance Lenders

Student Loan Refinance Lenders

There are several special resources you can open to refinancing your student loan debts. You can try your own bank or banks in your area, but you should know that most banks do not make such a loan. However, there are several lenders that address student loan refinancing at the national level.

Two of the more popular student loan growth companies are Good Credit and Lite Lender.

Good Credit is a web-based crowdfunding platform that specializes in providing and refinancing student loans. You can borrow up to $ 220,000 and come with very attractive interest rates. But there is a limitation – to use the credit program, you must be an undergraduate student. In this context, Good Credit will finance the cost of your postgraduate education and will also allow you to refinance student loan debt accumulated during your undergraduate education.

Lite Lender is perhaps the best known of web-based student loan refinancing companies. Lite Lender will not only offer very attractive pricing for up to 20 years in its refinance, but it will also allow you to include it. All of your outstanding student loan debts are on new credit. You must have an excellent loan, you must have a degree and you must find a solid job. And while Lite Lender gives credit to graduates of many schools, graduation or graduation from a school that is not on the list of eligible institutions does not extend the loan.

You can also call several lenders at a time as Trustworthy.

Why Refinancing may not be Right for You

When you are worried as much as you can to refinance your student loans, there are many situations where this can actually work against you:

If there is less than the star financial profile. Private lending resources require you to qualify for a refinement. Where your income, credit and business histories are supposed to be, you get an advantageous improvement. However, if your financial profile is fair or poor, you may not allow you to get a lower interest rate.

 

Fees in private source loans cannot be lower than what you pay now.

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It is entirely possible that the weighted average interest rates that you pay for your current student loan debt are lower than the best available now. You can continue to qualify for a private resource merger, but this will not lower your interest rate or mandatory monthly payment.

If you’re struggling to make your monthly student loan debt payments, federal student loans come with aid programs. One is the Income Reimbursement program or IBR. It keeps your monthly payment as low as 10% of your optional income and can be discharged in as little as 20 years. Another is a program that provides relief similar to Pay as You Win (PAY) IBR. These benefits will be lost if you refinance federal loans with a private loan.

You work in a public sector business.

The federal government only offers the Public Service Loan Donation Program (PSLFP) for Federal Student Loans. As part of the program, you can be entitled to full-time employment in a suitable public service profession, after making at least 120 months of payment, you may be entitled to forgiveness of your remaining balance due to your valid Federal Direct Loan Program (FDLP) loans. Bring your federal student loans back to a private loan and this benefit will disappear.

Private student lenders often provide certain benefits, but they are not as generous as those usually coming with federal student loans. For example, Lite Lender is an Unemployment Protection program. Under the plan, loan repayments can be suspended for up to 12 months if you are unemployed without your own business. During this time, Lite Lender will provide you with job hunting assistance. 

Federal loans have certain advantages if you cannot make your payments. 

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In most cases, the value of a revaluation primarily saves you money through low-interest rates or lower monthly payments. However, this metric is not completely reliable when a refinance includes federal student loans. You may find that by replacing a federal loan with a special one, the benefits you surrender will not justify the savings that refinancing will bring. This is especially true for an unstable situation in an economy and job market as it once was.

Break the numbers, absolutely, but make sure you are fully aware of what you dropped before including federal student loans in the special resource renewal package.