As defined, debt consolidation loan is a loan that you can avail which pay out all the different debts that you may currently be having. It is just like having one main loan which will manage all other minor debts. With debt consolidation loan, you can consolidate all the credit card debts and other bills into one manageable loan and lower your monthly payments.

Debt consolidation loan is beneficial as it combines all the loans you may be juggling all at once and allows you to take control of your finances. It also compresses all interests that come along with different loans because a debt consolidation loan usually offers lower long-term interest rate, which means you pay fewer interestcosts. In addition, you can also opt to lengthen the time you have to pay the loan according to what suits your capability, and lower your monthly payment.

If you pay off the loans you have through the debt consolidation loan, your credit standing can also gain positive rating, which makes it easier for you to obtain line of credit or loans in the future. Most importantly, a debt consolidation loan can give you a stress-free mind which leads to improved psychological and physical health.

On the other hand, debt consolidation loan could also be a trick that leads you into thinking that you can be freed from debt, and gives you an all the more unmanageable loan instead. Since you need to have your credit status checked when applying for a debtconsolidation loan, you may get a higher interest rate if your credit is worsened. Even if debt consolidation loan allows you to pay less every month, but considering the lengthened repayment term for you to pay off the loan, the amount of your total payment may be higher than the original debt amount.

It doesn’t really matter whether you choose debt consolidation loan or any other debt relief solutions as long as it fits you and leads you to the right financial direction. What matters most is that you take action about the situation, learn from past experiences, and make sure you don’t spend more than what you can earn from now on.

The advice is sound. Generally speaking, private student loans, which are offered by banks, credit unions, and other private lenders, don’t offer the same level of borrower protections and benefits that government student loans do.

As a student, you should seek out grants and scholarships first — money for college that you won’t have to repay — before taking on student loan debt. Then, ifyou’re still going to need college loans, you should, in general, make sure you’ve maximized all your available federal student loans before you consider taking out a private student loan.

Interest Rates & Repayment Options

Federal education loans have fixed interest rates and more flexible repayment terms than private loans. The Department of Education offers income-based repayment options that keep your monthly payments at a figure you can afford, repayment extensions to give you more time to repay, and loan deferments and forbearances that can temporarily postpone your student loan payments if you’re facing financial hardship.

If you go to work in the public sector, you may also be eligible for the discharge of some or all of your federal student loan debts.

With private student loans, on the other hand, your interest rate is almost always variable, and private lenders aren’t required to provide the kind of repayment flexibility thatcomes standard on federal college loans.

The current foreclosure crisis that began mushrooming, in part, because of adjustable-rate mortgages should be enough to make anyone leery of adjustable-rate loans on anything.

But it’s worth keeping in mind that when interest rates are low, as they are now, adjustable-rate private student loans can have a lower interest rate than their fixed-rate federal counterparts.

If you have excellent credit, or if you have a parent or co-signer with excellent credit, you may qualify for the lowest-rate private college loans, which currently carry interest rates that are as much as 3-percent to 6-percent lower than the rates on federal student and parent loans.

Interest rates are destined to rise as the economy continues to recover from the recession, so private loan rates won’t always be this low, but if you or your parents are in a position to pay that private student loan off relatively quickly, you may be able to save moneyover a government-issued college loan.

Covering Your College Costs

So why take out a private student loan at all?

Private student loans are meant to “fill the gap” in college funding that may be left after you reach your federal student borrowing limits. In many cases, families find that scholarships and federal financial aid simply aren’t enough to cover the rising cost of college.

Without private student loans, you may not be able to pay for college or continue your studies.

Statistically, college graduates have a better chance of being gainfully employed than non-graduates do, and college graduates, on average, earn more money in their jobs than workers who don’t have a college degree. For you as a college student, better job and salary prospects may make the burden of a reasonable amount of private student loans easier to bear.

Working With Private Student Loan Lenders

Student loan companies aren’tdeaf to the economic realities that college graduates are facing. Recently, some of the largest private student loan lenders have instituted new guidelines for the repayment and forgiveness of student loan debt.

Wells Fargo and Sallie Mae, for example, both announced this year that they would begin discharging private student loans upon the death of the borrower. Beforehand, that debt was being left to the co-signer to repay.

And as the recession and large swaths of unemployment among recent college graduates has led to higher rates of delinquency and default on college loans, some private lenders have shown a slight uptick in their willingness to work out modified repayment plans with troubled borrowers who are unable to repay their private student loans.

Being a Smart Student Borrower

For students who must turn to private education loans, it pays to shop around. Interest rates are always important, but they aren’t the only factor worthconsidering. Repayment policies, payment deferral options, default and late-payments penalties, interest-rate caps, and other terms may give some private student loan programs a clear advantage over others.

Always be mindful of the total amount of your debt from all sources, school loans and otherwise, and aim to limit your reliance on college loans, both federal and private.

The Department of Education’s National Student Loan Data System can help you track all your federal loan debt. Additionally, if you’re carrying debt from multiple federal college loans, the Education Department’s student loan debt consolidation program can help simplify the repayment process and may lower your monthly loan payments.

As you begin to repay your school loans, make it a priority to pay off thehigher-interest loans first.

By taking advantage of college scholarships, using all your federal financial aid options, and minimizing the amount of debt you take on to pay for school, you can benefit from the careful and limited borrowing of private student loans to help pay for your college education.