The best time to consider it is when you are undergoing a major financial upheaval, and need to get out of it. When you are under attack by creditors and lessors, and the debts are piling up quicker than you can take care of them, you should begin to seriously debate consolidating your loans and debts. Bad things can happen to good people; no matter how well you guard against them, for no one is immune to having a bad day. Mortgage consolidation saves you from being stressed out due to those niggling debt problems. You may not be able to wipe the slate clean, but you can make it more to your liking.

You should debate consolidation when you have a number of small loans that you have managed to acquire just through living (car loans, student loans, and even large credit card debts); and they are eating through too much of your paycheck. By using consolidation, you can shrink how much you are paying, and help ease your debt. You need to realize that consolidation isn’t just for those with credit problems. Even those with great credit can benefit from paying off a number of small debts and replacing them with one big one. It makes good credit look better, and gives you back your paycheck.

However, there are times when you should avoid consolidation. Keep in mind that it is a last resort method, and should be used sparingly. If you can take care of your debts without too much stress, do so. You can never tell when you may have problems that may require the tactical nuke that consolidation can be. After all, not all situations require dealing with the most extreme methods available, and you may be able to ride them out.

At the same time, it may be more advantageous to save it for when you really need it, and deal with your debts in more conventional methods. If you find yourself constantly running up debts, you wish to consider financial counseling instead. One of the important things for you to decide is – What is the most effective strategy for your debt problems?

Sometimes you need to just go for debt consolidation as quickly as possible. While, in some situations you might need to consider the other viable options that can help you steer clear of your debt hassles. Don’t feel that you need to try the newest methods all the time, but do keep them in mind. You can never tell when your back is against the wall and you need to try something different.

It’s extremely easy in this day and age to get behind on bills. The economy isn’t as set in stone as some would like. Thus, anyone can be affected by an economic downturn, in the form of being laid off or an extended sickness that wipes out your savings. Fraud and identity theft are running rampant, creating even more problems. Worse, life itself requires more debts than before, as school tuitions and car prices go up. In short, life is more expensive and, until you win a lottery, loans are the only way to cover the increased expenses.

There surely is a way to cope with this extra debt. Your house is probably the best asset you have. Besides providing a home to those under its roof, it offers another form of security – debt security. Every house is worth a certain amount of equity. By drawing on the equity of your home, you can create a line of credit that can help you pay off your debts, and consolidate a number of your other loans. In short, by trading off one loan for a number of small loans, you can solve a number of problems, and possibly get ahead. 

By taking out a second mortgage, you create a line of credit that allows you some leeway in how you pay off your loans and bills. Better yet, you can replace all of your payments to sundry loans that use up most of your paycheck by one smaller payment. And it helps your credit rating, as consolidating your loans pays them off and replaces them with one loan; so, any potential creditors will see that you paid off the loans. There are a number of advantages to consolidating your loans and paying off your bills through a second mortgage. 

At the same time, mortgage consolidation is not something that you should enter into without considering all other options. Mortgage consolidation carries with it all of the usual risks associated with mortgages. I you default, you lose the house just like you would with any primary mortgage. Thus, if you have another financial upset, you may not have the same resources at hand that you used to get out of your prior problem. You may be able to re-consolidate, but that is not something you can count on unless you have paid most of the mortgage. 

Mortgage consolidation gives you some release, as you get a chance to take a step back and look at your situation a little more objectively. And that objectivity allows you to re-arrange your priorities, and relax a little. Surely, that breathing space can be a major stress relief, especially when you have had your back to the wall for a long time. And anything that gets your back away from that wall can be a great thing!

Loan consolidation enables you to roll your different loans into one. This helps you easily manage your loans, and you pay low, affordable monthly payments. However, there are a few important things that need careful consideration before you zero in on a student loan consolidation agreement.

Here are the five most important points that should consider before getting a student loan consolidation.

1. Deciding Right

Don’t rush into getting a student loan consolidation. There is no point taking a wrong decision in a hurry. First of all, you should think whether or not you actually need a student loan consolidation. Will you be able to keep paying the monthly installments for a longer duration of time? Just ponder over these questions before saying “yes” to a student loan consolidation scheme.

2. How much the consolidated loan costs you?

It’ really imperative for you to calculate the amount of money you will be paying back for your student loan consolidation. Many loan companies will have you pay lower monthly repayments, by spreading the loan agreement over a much longer length of time. This means that you will be paying a lot more than what you actually borrowed. So, unless you are really struggling with the repayments, student loan consolidation may not be the best option for you.

3. Rate of interest

You should keep close tabs on the rate of interest that your lender is charging. Different student loans may have a different rate of interest. But, usually student loan consolidation comes with a rather low rate of interest. However, don’t get misled by the low monthly payments. A low monthly payment does not necessarily mean that the rate of interest will also be low.

Furthermore, you should consider having your current rate of interest locked. If the finance companies that hold your student loans are willing to do this, loan consolidation may not be the right option for you. If the rate is frozen, you will be protected against interest rate hikes in the future.

4. Go for Grace period

Try getting your student loan consolidation during the grace period. Many student loans offer this facility wherein you don’t start paying the money back until 5-6 months after you graduate. Securing your loan during the so-called grace period may give you a lower rate of interest.

5. Check the Terms & Conditions

Don’t make a mistake of going by what you have been told. Get everything documented. There should be written agreements, and no verbal ones. You must ensure that all the terms and conditions as well as the warranties promised to you are clearly stated in the written deal. You must carefully read all the points.

And keep an eye on the hidden costs as well. Many student loan consolidations will have a hidden arrangement fee. This will likely be factored into the cost of your loan, which makes you pay more money in the long run.

However, managing these loans, doling out the various loan payments at varied interest rates, and maintaining a record of all the loan related activities can prove to be really pesky for the students. After all, students are here to study! 

That’s where student loan consolidation comes in handy.  Student loan consolidation binds together all your different loans to turn them into a single loan. Thus, you don’t have to worry about five different loans and make five different monthly payments at five different interest rates.

Specially devised to help students, a student loan consolidation program entails paying one affordable monthly payment. However, since the monthly payment is low, you have to pay for a longer period of time. Student loan consolidation interest rates are usually genuine calculated by rounding up an average of all the loans that you are consolidating. Interest rate does not exceed 8.25%.

The average interest rate is also rounded up to the nearest 1/8th of a percentage. This does not mean that the consolidator will be paying a lower amount of interest rate on the loans. But, it ensures that there will be a relatively unchanged interest rate throughout the loan’s lifetime. However, in terms of the interest rates, sometimes not consolidating can be more beneficial.

You can avail yourself of loan consolidation either by opting for a federal student loan consolidation or though a private company. Under a federal student loan consolidation program, you are offered a new loan, so that you may be able to clear either all of or some portions of your pre-existing federal student loans.

Usually, this loan is payable within a period of thirty years, on a fixed rate of interest. Federal student loan consolidation provides students with several advantages (such as tax deductible interest and possibility of deferring payments if the student decides to pursue further education) that are not offered by a loan consolidation by a private company. A private loan works like any another loan from a private bank or other financial institute.

It is advisable that if you have federal loans as well as private loans, you should consolidate them independently. If you consolidate a federal loan with a non-federal loan, you will not be able to get the benefits offered by federal loan consolidation.

You must do proper research before opting for a student loan consolidation option. This will help you put things into perspective, weigh the pros and cons, and finally take the right decision. FinAid.org is a good online resource that can help you get the student loan consolidation details you are looking for. It even lets you compare the costs and rate of interest of the different consolidated loans available in the United States.

You can consolidate a whole host of federal student loans such as Stafford Loans (Subsidized as well as Unsubsidized), HEAL/HPSL Student Loans, Federal Direct Stafford Loans (Subsidized as well as Unsubsidized), Parent PLUS Loans, Federal Direct Parent PLUS Loans, Perkins Loans, and Nursing School Loans.

Benefits of Federal Student Loan Consolidation

Some of the key benefits of Federal Student Loan Consolidation are mentioned as under:

• Makes things easier for you by rolling all your education loans into one.
• You have to make just one easy-on-pocket payment every month.
• Trims down the monthly student loan payment by 52%.
• Helps you save money for your current other needs.
• Improves your credit rating.

How does a federal student loan consolidation scheme work?

A fixed-rate refinancing program, federal student loan consolidation lumps together all your federal student loans to make a single new loan. Federal student loan consolidation manages all your loans, winnows out those constant payment worries, and enables you to concentrate on your studies.

Furthermore, you can maneuver the consolidated loan according to your affordability and viability. You can carve out the time duration you would need for repaying the consolidated loan. Based on the amount you owe for your education debts, you can repay the money in ten years or extend this period to even thirty years.

Of course, if you opt for a longer duration, you will have to pay more, but the loan would not be that much of an encumbrance on you. With low monthly payments, you can easily manage it all without getting cramped for money that you need for your other living and housing expenses.

Interest Rate

Student loan consolidation interest rate is a fixed rate equal to a weighted average of the interest rates on your existing loans, rounded up to the nearest one-eighth of one percent. Usually, there are no discounts on the payments; however, you can enquire about time based discounts. Besides, for a student loan consolidation, you don’t have to pay any penalties for early repayment. In fact, early repayments are interest-free.

No Non-federal loans with Federal student loan

Some students have a mistaken belief that they can combine any type of non-federal loan (such as car loans, home loans, mortgages, and private loans) with a federal student loan. This is wrong. Federal student loan consolidation will include only the federal education loans.
With a view to providing every eligible student with a chance to pursue higher education, US Government backs a student via federal student loans. If a student fails to repay the loan amount, the government pays it. Thus, the lenders have no risk, for they know they will get their money back. Since, federal student loan pertains to education; you cannot combine other personal loans with a federal student loan while opting for a consolidation.