Can Debt Consolidation Help Me Save for My Kids’ college?
When people think of debt consolidation, they tend to picture a financial tool that helps people who are over their heads in debt. While these loans are certainly used a lot for this purpose, they can also be used by people who just want to free up cash to make investments or save for a major expense. One of the most common reasons that people need to free up cash is that they want to save for their kids’ education.Higher education costs have been rising faster than inflation for years, forcing many families to pay a lot more out of pocket for a degree than they did several decades ago. In addition, the amount of grants from the government has decreased, making many students take out loans at high interest rates for an education. These loans take years to pay off, and many parents finish paying off the loans from their education in time to help their children pay for theirs.Debt consolidation can be a good way to make it easier to save. If you’re having trouble coming up with enough money to save for college because of student loans, credit cards, or other loans, then you probably could benefit from debt consolidation. Debt consolidation loans combine all of your existing debt into a single loan. This loan has a lower interest rate and better payment terms than what you’re currently paying. Because you’re paying less in interest and the payments are stretched out over a longer period of time, it’s possible to pay less than half of what you’re currently paying for your debt.By using the money you save from a debt consolidation loan and investing it, you’ll be able to quickly grow your college savings fund. Even if your child is already in school, you’ll be able to start devoting your savings to his or her tuition bills right away. When you apply, tell your debt counselor that you want to save for college, and he or she will be able to help you develop a plan to get you there.
As an added bonus, many people report that their credit scores go up after taking out a debt consolidation loan. That means that if you have to take out a student or parent loan, you’ll be able to qualify for better interest rates.