Government Debt Consolidation Loans – Update

Ricky Lim asked:


By using a federal student loan consolidation program, student loan holders can consolidate their existing educational loans.

The procedure is very simple: you just have to call the Direct Loan Servicing Center (a division of the U.S. Department of Education) and in a very short period of time, you’ll have your new consolidation loan.

The new interest rate will be a weighted average of the interest rates of all your current federal student loans.

It is even possible to consolidate additional debt into this loan if this is considered to be a viable alternative.

The main reason that leads people to ask for debt consolidation is the huge sum of money spent on monthly payments. If you mix all the loans into a single one, your new monthly payment will become very affordable, not to mention that the loan can stretch for a few more years.

In order to do that, you can go to the bank and ask for a personal loan. It’s recommended that you use a separate loan for the student loans and another one for the rest of the debts.

Financial experts don’t encourage the combination of student loans using a privately funded debt consolidation loan because that will only create more financial problems.

In most cases of federal student loans, the interest is tax deductible. Why would anyone give up such a benefit? In this situation, having two loans is better than having a single one.

The only exception is when the consolidation loan is actually home equity loan. If you’re lucky you can obtain an interest rate lower that the one from your student loan.

Home equity loans are also tax deductible and you won’t loose the benefits. In time your income will rise and that affect the interest of writing off the student loan.

But, with home equity loan interest, you can continue writing off the amount without any problems.

To sum up all the above, sometimes including a student loan next to other loans into a single one can be viable but there are times when separate loans are simply the best option.



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John Chase asked:


Debt Consolidation Loans

There are few things more stressful and frustrating to be faced with a continually mounting pile of debts but finding yourself strapped for cash and looking for a way out. With the economy in such a state of uproar, more and more individuals and families are finding it hard to make ends meet to provide basic necessities that are needed for the home, let alone being able to make the minimum monthly payments that they are obligated with. If you are among those who have insurmountable stacks of debt but not enough income to pay for it all, you should consider debt consolidation.

Not Everyone Should Consolidate

Debt consolidation can be confusing, and not all borrowers are good candidates for consolidating their debt, as debt consolidation can leave a mark on your credit file. Debt consolidation is for those borrowers who have allowed their debt to get out of hand and cannot reasonably afford to repay their debt under the current terms and conditions of their various loans (or credit card agreements) – and especially for those who have been considering filing bankruptcy proceedings.

You can consolidate many types of debt, including credit card balances, personal loans, automobile loans, and private student loans. Keep in mind that government student loans, such as Perkins, Stafford, or PLUS loans from the U.S. Department of Education do not qualify for consolidation under this type of loan.

Your debt consolidation lender will look at all of the debt that you have accumulated to determine the amount that they are willing to extend to you in your debt consolidation loan. Debt consolidation loans cover the debt owed to all of your previous creditors (if you choose to include them in the consolidation) and pays them off completely, leaving you with the responsibility to repay your debt consolidation lender.

Pay Less Each Month, Avoid Bankruptcy

Among the many advantages of consolidating your debts is that you will most likely receive a greatly reduced interest rate (especially as compared to credit card interest rates) than you are currently paying, which can literally save you thousands of dollars. Also, your monthly payment for your debt consolidation will be substantially less than the combined payments you were making before the consolidation, which will allow you to use your income to pay for things that you need with cash – eliminating the need to incur additional debt.

You might want to consider credit counseling when you obtain your loan consolidation. Credit counseling is great for those borrowers who have found themselves in the types of financial situations that require debt consolidation and bankruptcy. Credit counselors can teach you how to be a better steward of your credit and how to make a budget to live by that will keep you on track with meeting expenses without relying on credit cards and loans.

Save With Online Lenders

To save additional dollars on your consolidation loan, consider going with an online lender. Online lenders not only have more money to loan borrowers of all credit backgrounds (which improves your chances of getting the consolidation loan you need), they also tend to offer lower interest rates that will make your consolidation loan payment easier to manage.



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