Private student loan consolidation, also known as refinancing, involves combining multiple private student loans into one single loan through a private lender. Student loan consolidation or refinancing is of two types, federal and private consolidation. Private student loan consolidation is also known as student loan refinancing through a private lender, and attracts higher interest rates compared to federal student loans. Private loans have fewer relief options, and they make up to 10 percent of the total student loans.
Unlike federal student loans, private student loans cannot be discharged in bankruptcy. For this reason, lenders still have a strong claim over credit even when the borrower is bankrupt.
How Private Student Loan Consolidation Works
Private student loan consolidation involves combining multiple existing private student loans into a single new loan with a different lender. This can make managing your loans easier by having just one monthly payment. To qualify for private consolidation, you typically need to meet certain requirements. These include being a US citizen or resident, being at least 18 years old, passing a credit check, having enough income to repay the new loan, and being the primary borrower for the loans you want to consolidate. Each lender may have slightly different criteria, but these are the general conditions you’ll likely encounter when applying for private consolidation.
You can combine private and federal loans with private, single and new loans. It is an excellent way to save money, especially if you can get lower interest rates. Private lenders have an option to consolidate student loans into one with a more straightforward repayment plan. For instance, you can combine a federal and private loan with a private lender. The main objective of loan consolidation is usually to enjoy the ease of a single payment with low-interest rates.
Interest rate is determined by your credit score, credit history, education background and job history. The interest rates usually range from 2% to 9%. If you have graduated, and you have a stable income, then you can be sure of lower interest rates, and you can also qualify for a home equity loan. Home equity loans usually attract a fixed interest rate, unlike private student loans that have variable interest rates.
Student Loan App
- ChangEd, a Shark Tank and Mark Cuban backed app, is an app that allows you to link all of your student loans into one easy to use app. This app will help you build a repayment path that’s budget friendly and will automate extra savings it finds toward your debt. It’s helped thousands of borrowers pay off over $20 million in debt, saving the average borrower thousands in interest costs and helping them pay it off years sooner.
When to Consolidate Private Student Loan
You need to consolidate private student loans in the following instances.
- If you have been paying student loan on time for sometime after leaving school.
- If you have a regular income.
- If you have a good credit score that is higher than 690.
- If you have a co-signer with the above qualifications.
Best Private Student Loan Consolidation Providers
There are many private student loan consolidation companies in the US. Here are some of the popular private student loan consolidation providers:
It is easy to apply for a student loan consolidation with Commonbond. It takes a few minutes and comes with a free money mentor. The money monitor can assist you in getting more money, managing your finances, and getting an internship. Commonbond has a fixed annual interest rate of between 5.15% and 9.74%. The annual variable interest rate ranges between 3.31% and 9.29%.
You get a payment loan that suits your budget. With Earnest, you enjoy fairs rates and flexible repayment terms. They have customer service via call, text or email. Besides, you can access the Precision Pricing tool that can help you save money. The tool helps you to pick the right payment plan and rate, thereby saving on your budget. Their annual fixed APR rate is between 3.2% and 6.99%, while the yearly variable rate is between 1.99% and 6.89%.
Discover Student Loans
With Discover, you enjoy low-interest rates where variable APR rates range between 3.99% and 7.24% and while the fixed APR rates range between 3.99% and 6.99%. Discover has zero fees for a loan application or late fees, while you can consolidate federal and private student loans.
College Ave student loans
You can reduce your total cost using College Ave without application or origination fees. You will enjoy low fixed APR rates of between 3.54% and 6.24% and variable APR rates of between 2.62% and 6.12%.
If you do not have a co-signer, Ascent can help you consolidate your loan without incurring application, the origination or disbursement fees. It has fixed APR starting from 4.26% and variable APR starting from 3.28%. You need to have a credit score of at least 680, while you can get a 0.25% interest rate when you apply for auto-payment.
Once you qualify for student loan consolidation, you are given 30 days to accept the loan terms. You also get three days to cancel the consolidation. You cannot reverse the process after the disbursement of the loan and repayment of existing loans has been made.