To consolidate or not to consolidate my private loans - that is the question.
September 5, 2008
I have spoke to many students who are under the belief that consolidation is a means by which to lower your interest rate, however that is not the case. The real benefit to consolidating is extending your loan terms and minimizing your monthly payment. Granted, your rate may decrease as some lenders use the LIBOR index while others base your interest rate off the prime, but that is no guarantee.
So is consolidation right for you? Each person’s financial situation is different so it’s not a black or white answer. What I can tell you is this, if you are struggling with your monthly payment than consolidation will probably serve you well.
We’ve actually seen a spike in consolidation applications over the past month which is reflection on the current state of the economy. Many don’t have jobs or are only working part-time right now and need to lower their monthly payment. The job market is the worst it’s been in years. According to the Labor Department the unemployment rate just jumped to 6.1% the highest in 5 years. Over 600,000 jobs have been lost so far in 2008! I guess we should just be thankful we are in a recession and not a depression.
If you would like to find out what your interest rate and payment terms would be without obligation you may (click here).
What is a FICO score?
August 19, 2008
FICO comes from the Fair Isaac Company, which came up with the process of condensing all of your credit information into one three-digit number.
Three major credit bureaus hold your FICO score; Equifax, TransUnion, and Experian, and each calculate it a little different than the others. Should you wish to dispute a mark on your credit report from one of the three bureaus you can write to them like I have done previously (see below for address information).
Equifax Information Services
P O BOX 740256
Atlanta, GA 30374
800-997-2493
TransUnion
Customer Disclosure Center
Trans Union Consumer Relations
PO Box 2000
Chester, PA 19022-2000
800-888-4213
Experian
NCAC
PO Box 9556
Allen TX 75013
888-397-3742
Your FICO score is used in determining your interest rate, and is even used as a barometer for getting a job. FICO scores range between 300 and 850. Ratings are as follows:
Excellent: Over 750
Very Good: 720 or more
Acceptable: 660 to 720
Uncertain: 620 to 660
Risky: less than 620
The formula used to calculate your FICO score includes information based on several factors:
~ 35% on your payment history
~ 30% on the amount you currently owe lenders
~ 15% on the length of your credit history
~ 10% on the number of new credit accounts you’ve opened or applied for (fewer is better)
~ 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)
Now that you know what your FICO score is and how it is calculated you’ll want to work on getting it as high as possible. I’ll be offering some tips in the coming weeks!
For more information about credit or to apply for a credit card (click here).
Private Loan Consolidation
August 14, 2008
Consolidation is a great debt management tool. It allows you more time to repay your loan(s). You can generally extend your loan terms out to 25 or 30 years from the initial 10-year marker, which means you can dramatically lower your monthly payment.
Another good thing these days are the lower interest rates. When the economy is slumping interest rates tend to get cut. As a byproduct of these rate cuts (lower interest rates) you the consumer benefit, which is why it’s a great time to consolidate your private student loans.
With one convenient low payment, no prepayment penalties, and lower interest rates it is the perfect time to consolidate.
If you are seeking private loan consolidation (click here).
Not Happy with Your Current Consolidation Company?
July 16, 2008
I have heard recently that if you have previously consolidated your Federal loans, you can switch your loans over the US Dept of Education (Direct Loans). Keep in mind that your rate will not change, and your loan term will most likely start over…so if you have been paying for 5 years already, you may be paying for longer. However, this can be avoided by just paying more than what is due each month, therefore you would be done paying sooner than the time allotted in the consolidation. For more information on this you can call 1800-557-7392 or visit loanconsolidation.ed.gov
Fixed rate Stafford loan rate drop
June 30, 2008
As of July 1, 2008, the interest rate on all NEW subsidized Stafford loans will drop to 6.0%, a reduction of 0.8%. Bear this in mind next year when it’s time to consolidate your student loans!
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