Billions of dollars are owed in private student loans. Considering that these loans were co-signed by another party, defaulting on your loan repayments can cause serious problems between you and the person who co-signed the loan. It can even cause your family financial stress.
The best thing to do would be to try and reduce the amount owed through debt consolidation. When you do this, you get to pay off your debt in lower monthly payments. However, keep in mind that this means that you will repay your loan for a longer period of time. Here are tips to keep in mind when consolidating your private student loans.
1. Apply to different consolidation companies
When you are looking for a debt consolidation company, chances are that some financial institutions will reject your application. That is why you should not just focus on one company. Consider approaching multiple companies so that in case you are turned down by one institution, you can try out another one.
2. Have a regular income
To minimize chances of your application being turned down, you need to have a regular income. That is, you must have a regular job or a different reliable way of earning money regularly. If there are signs that you will struggle to make your monthly payments, the financial institution won’t want to take you on ss their client.
It also helps if you have a good credit rating.
3. Keep making your monthly debt payments
You have to keep making your monthly debt payments until the debt consolidation company has told you that they have started making payments. The mistake many people make is to stop making the payments as soon as the company agrees to take over their loans.
This may result in you getting late fee penalties since the company may not yet have started paying off the loans.
Do not stop paying your current lenders until the consolidation company has taken over and the institution has confirmed to you that they have indeed started repaying your loan.
4. Read the fine print
Before you sign up for the consolidation, you have to read the terms and conditions. Know what you are getting yourself into. Some of the important things to know include the interest rates and the loan repayment period.
5. Negotiate favorable terms
You do not have to accept all the terms given to you. You can negotiate terms that are favorable to you. This will minimize chances of you defaulting on your loan.
6. Don’t neglect your payments
Make an effort to make all your payments on time. Defaulting on payments will result in penalties.
7. Do not consolidate private and federal loans together
Do not consolidate your federal loans together with your private loans. According to the federal loans program, if you do so, you will lose your rights. This means that you will not be able to forbear, cancel or defer your federal loans
8. You don’t have to consolidate all your private loans
You can choose to consolidate your high interest loans only. This is so that you can negotiate for lower interest rates.