In the U.S., borrowers with high student loans have the option to consolidate the loans into one account. A private lender offers the programs that prevent borrowers from facing multiple, high-cost payments each month. A debt management consultant helps students weigh the pros and cons of debt consolidation for student loans.
Can the Borrower Acquire One Loan?
The purpose of debt consolidation loans is to combine all debts into one account. The loan programs available to the consumer defines whether the consumer has the option to create one account. If consolidating student loans, debt consolidation isn’t feasible if the lender cannot combine all loans into one account.
What Protection is Offered by the New Lender?
Government student loans provide borrowers with further protection than a traditional loan program. The students have the option to acquire a forbearance if they are unable to pay their payments for up to one year. The government also offers options to reduce the total monthly payment for a predetermined amount of time. It is less likely that a traditional lender offers the same level of protection for the loans. A student who has higher-than-average student loans may need to consider other options first.
What is the Total Balance of the Consolidation Loan?
Next, the lender calculates the total balance paid through the consolidation loan. The value is compared to the exact balance paid through the government student loan program. If the balance of the consolidation loan is less than the government option, it is feasible for the borrower to use loan consolidation.
Are All Loans Paid in Full Through the Program?
The final consideration is whether all loans are paid when the borrower acquires the debt consolidation loan. Typically, the arrangements allow the lender to send the full balance of the loan to the government lender and receive a receipt. The receipt shows that all loans are paid in full and the borrower doesn’t owe the government any further payments.
In the U.S., borrowers lower their volume of debt by choosing debt consolidation loans. For students, the options lower interest rates and help them avoid high monthly payments. However, for some, it is urgent that the borrower considers potential protection provided by the government lenders. Consumers who want to review details about the pros and cons of debt consolidation are encouraged to contact a debt management consultant now.