Clearing Up The Confusion About Student Loans

Clearing Up The Confusion About Student Loans



Clearing Up the​ Confusion About Student Loans
For many people,​ the​ student loans they carry after they graduate from college are their very first debt .​
This means that terms like fixed rate,​ variable rate,​ and consolidation are new and unfamiliar .​
Learning about financial terminology can be intimidating,​ but the​ more fully you​ understand your student loan package the​ more likely you​ will be to​ be able to​ develop a​ smart and realistic plan to​ get out of​ debt .​
Understanding your loans can help you​ save money while you​ develop the​ financial know how that will help you​ throughout your lifetime .​
There are two basic kinds of​ student loans .​
One has a​ fixed interest rate,​ and one has a​ variable interest rate .​
a​ fixed rate loan will keep the​ same interest rate that it​ has now for the​ duration of​ the​ lending period .​
With a​ fixed rate loan,​ the​ interest rate will stay the​ same as​ it​ is​ today no matter what kind of​ changes,​ growth,​ or​ crashes the​ financial sector experiences in​ the​ coming years .​
a​ variable rate loan is​ subject to​ market fluctuations .​
If your loan has a​ variable interest rate,​ the​ amount of​ interest you​ will be asked to​ pay in​ the​ future can rise and fall with market trends.
When it​ comes to​ student loans,​ the​ biggest question is​ whether to​ consolidate your loans or​ not .​
In some cases,​ consolidating your loans can lower your monthly payments and help you​ avoid high interest rates which is​ a​ winning combination that can save you​ money in​ the​ short term and in​ the​ long run .​
However,​ consolidation doesn’t make sense for everybody .​
Before you​ decide whether to​ consolidate,​ get to​ know your loans.
Consolidation allows you​ to​ combine several loans of​ different types into a​ single,​ fixed rate loan .​
This means that you​ will only have to​ make a​ single payment every month,​ no matter how many lenders initially helped you​ pay your way through school .​
Often,​ consolidating a​ loan allows you​ to​ extend the​ repayment period,​ which means lower payments every month .​
So if​ you​ are finding that your monthly payments are becoming a​ serious financial burden,​ consolidating can offer you​ relief .​
However,​ lower payments also mean a​ longer repayment period .​
So if​ your top priority is​ to​ get out of​ debt quickly,​ consolidating your loans may not be a​ good choice .​
If one or​ more of​ your loans are variable rate,​ consolidation can offer you​ security by allowing you​ to​ plan on​ a​ fixed interest rate for the​ duration of​ your repayment period .​
However,​ in​ many cases the​ interest rate on​ a​ consolidated package is​ a​ bit higher than the​ average market rate,​ so if​ the​ majority of​ your loans are already fixed rate it​ usually doesn’t make financial sense to​ consolidate.




Related Articles:




Powered by Blogger.