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Comparison
Shopping for a Consolidation Loan
Shopping
for a loan is just like shopping for a car: you want to get as much
as you can, and pay back as little as possible.
Since
federal regulation dictates the interest rate of all federal consolidation
loan programs, what you will be comparing are ways to save money.
Because different lenders offer different incentives it will be
up to you to determine which lender offers the best potential for
savings. First, however, you must determine (per federal regulation)
the lenders available for you to choose from.
Your
"potential lender" list: Stafford loan borrowers wishing
to consolidate must first approach their Stafford loan lender. If
the lender does not offer a consolidation loan, or offers a consolidation
loan, but it does not include an income-sensitive repayment plan
that the borrower considers reasonable, the borrower can go through
another bank, or any other federal consolidation program (the Department
of Education's William D. Ford Direct Consolidation program).
Things
to consider: Once you know your lender choices,
request that each of them mail you a loan consolidation packet (or
get the information from their web pages). Compare potential savings
options, like the following:
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If you are in your student loan grace period, will consolidating
now put you into immediate repayment?
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Will the consolidation lender let you include a defaulted loan
(if applicable)?
What types of interest reduction incentives are offered?
Examples:
a) Will auto payment reduce the interest rate?
b) Will a consecutively on-time repayment history
earn an interest reduction?
c) Will consolidating within a certain time
frame earn an interest rate reduction?
d) Will an interest rate reduction be offered
if you lock in to your consolidation loan, but do not finalize
the process until the end of the grace period?
Review
all the information provided before making your decision.
Helpful
links:
Federal student loans that can be consolidated
Lender
list
The consolidation application process
Consolidating with a spouse
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