Can student debt consolidation loans help you?
Debt consolidation loans can be a good way to get your credit cards paid off faster, but a lot of people wonder if they can use it for their student loans. With student loan debt levels skyrocketing, it’s becoming more and more common for people to need help getting their debt paid off.
Understanding Student Debt Consolidation
While it is certainly possible to get your student loans paid off with debt consolidation, it is important to go into the process with as much information as possible. To start, it’s important to know that debt consolidation for student loans is slightly different than debt consolidation for other types of debt. In a typical debt consolidation, the goal is usually to find a loan with both a low interest rate and a lower monthly payment than what a person is currently paying. With credit card debt this is relatively easy; credit cards have some of the highest interest rates in the lending industry.
Student loans, particularly those backed by the US government, are some of the lowest interest rate unsecured debt on the market. This has a lot to do with the fact that this particular form of debt can almost never be discharged in bankruptcy, essentially guaranteeing the lender that it will be paid back eventually. When a person with this type of debt looks to refinance it, it can be very hard to find a loan with a lower interest rate, because consolidation loans do not come with this guarantee.
Criteria for a Student Debt Consolidation Loan
The solution is to either look for a long time to find a student debt consolidation loan with a lower interest rate, or to agree to taking out a loan with a higher interest rate but better payment terms. This usually means paying more over the life of the loan, but each monthly payment will be lower than what a person is currently paying.
If a person is having trouble making their student loan payments every month, using a student debt consolidation loan can be a way to get payments down to a manageable level. Once a person is in a position to pay more, however, it might be a good idea to get the loan paid off as quickly as possible. People who are simply looking for a way to get their student loan paid off faster will probably not benefit from this type of loan.