12.29.08 | Are there any disadvantages to getting a consolidation loan?
YES, there could be.
Consolidation is used as a debt management tool and is ideal for those who are having difficulty making their monthly payments. It is designed to extend out your loan terms and minimize your monthly payment. Because of the additional years, consolidation may significantly increase the total cost of repaying the loan due to the additional amount of interest which will accrue.
Another possible disadvantage is you may lose out on borrower benefits such as interest discounts and rebates that your current lender provides. Many consolidation lenders do not offer these benefits.
And finally, you may hit the consolidation market at the wrong time. If you happen to consolidate your federal loans when the interest rate is high than you are stuck with that rate. You can not consolidate your loans again at a later date should the interest rate drop. You are stuck with the rate at the time of your consolidation. It is not like refinancing a mortgage where you can refi an infinite amount of times to try and score the best interest rate.
Five most recent student loan consolidation blog posts:
The Student Loan Help blog is sponsored in part by:
This was an interesting read. You always hear a lot about the benefits of student loan consolidation, but few people ever consider the downsides.
Thanks for the other perspective!
February 28th, 2009 | #
Usually, if your debt is quite large, cost of consolidation service is diminishable; however you still should note that someone is making profit from that. Sometimes, having chosen a wrong merchant, you can be left unnoticeably robbed.
I encourage you to research available solutions and discuss ideas before signing the agreement.
February 24th, 2009 | #
Debt Consolidation Loans are not for everyone, you need to take into account every property of the this type of loan, for some people it might be the right thing to do, but sometimes it can be a mistake.
January 15th, 2009 | #
You really think I would trust you with my loan when you cannot even prove that you are literate? Give me a break and find a new line of work.
And finally, you may hit the consolidation market at the wrong time. If you happen to consolidate your federal loans when the interest rate is high than you are stuck with that rate.
December 29th, 2008 | #