It’s no news that loan consolidation can lower interest rates. However, you may be surprised at how little student loan consolidation rates save you in the long run. That is, unless you do your homework and get the lowest rates possible.
Maintaining a Good Credit History is Crucial
The best way to ensure low student loan consolidation rates is to have a good credit history. It also helps if all of the loans you want to consolidate are in good standing. Agreeing to make payments even while you are still in school can give you further leverage in negotiating a lower interest rate for you consolidation.
Other factors that may determine your interest rate include the type of interest rate you opt for in your consolidation. If you wish to have a fixed rate, you may not be able to get the lowest student loan consolidation rates possible. However, if you are willing to use an adjustable rate, your interest rates will be around the national average.
Negotiate With Your Lender
Your payment plan will also pay a role. Often you can negotiate a lower interest rate by lengthening the term of the loan. The lender makes more money if they charge lower interest for thirty years than if they charge higher interest for ten years.
However, negotiations and credit terms are not the sole determination of student loan consolidation rates. A good deal of the decision regarding your student loan consolidation rates will be the current national average for interest rates. If the average interest rates are currently higher or about the same as the rates of your current loans, you may benefit from waiting to consolidate until interest rates become lower.
Pay Attention to Your Interest Rates
Finally, unless the interest rates on your current loans are higher than nine percent, avoid consolidation through the Department of Education. This consolidation comes with a fixed eight and one half percent interest rate for the term of the loan. There have been several times over the last several years when interest rates dropped below six percent, and there is no reason to pay that much interest unless you have no other option for consolidation.