Private Student Loan Consolidation
Private student loan consolidation by way of debt settlement can be a financial life saver to many young adults or parents struggling to pay down their private student loans. In many cases, even trying to make the minimum payments is not feasible. This is because private student loans have a higher interest rate than federal student loans and during the time that they are in forbearance while the student is in school, they are accumulating interest month after month. This makes for a very hefty bill ,usually, once the payments start coming due.
The one good thing about private student loans compared to federal student loans, though, is that since private student loans are unsecured, they can also be settled, unlike federal student loans. This difference has made private student loan consolidation through a debt settlement process a popular and viable alternative to getting rid of private student loans (and the burdens that accompany them) once and for all. This option is also especially nice considering it's very difficult to bankrupt on private student loans.
If you are one of the many who has found it increasingly hard to keep up with even your minimum student loan payments or have even gotten to the point of falling behind and have become delinquent, then consolidating your private student loans through a debt relief program is something worth looking into. No one wants to be in between a rock and a hard place financially, especially when you are new among the working force and trying to start a family, buy your first home, and possibly considering having children soon..
One of the most important rules when looking into a company to negotiate a settlement on your private student loans is to make sure you choose a reputable debt help company. Just like in any industry, there are good companies, bad companies, and in between companies. Make sure and talk to how ever many you need to until you feel certain you have chosen a good debt settlement company.
How much will I save by consolidating my private student loans?
The amount you save through a private student loan settlement and consolidation will depend first and foremost on how much you owe. The more you owe, the more you will typically save. The percent of saving is on average about the same for everyone. Typically, you will save in the neighborhood of 50% off what you would pay if you were paying your private student loans back by paying minimum payments. This is settling your private student loans not only saves you years off your payback, it also saves you thousands of dollars in interest.
What risks are involved with private student loan consolidation through debt settlement?
There are alternatives to private student loans consolidation by way of debt settlement
There are some good alternative tips at Student Loan hero for dealing with private student loans. Student Loan Hero Also, if you make less than $70,000 as a single individual or less than $145,000 as a couple, you may qualify for some type of tax relief. Another factor is how much of the loan you used for education purposes. The more of the private student loan you spent on education, the more deduction you would get on your taxes. Also, only a portion of the interest (up to $2,500) is tax deductible. This is not the type of deduction or savings that will get you fully back on track financially if you are struggling tremendously with your private student loan payback, but it's worth looking into if yopu're income is on the high side of the qualifying income needed.
Do you get a discounted interest rate by auto drafting?
If you answered yes to this question, this is yet another saving that can be added on top of the tax savings if you qualify. If you are not sure if your lender gives a discount for setting your payments to auto draft, it's worth checking. Remember, every bit of saving monthly can add up to a very large saving over the lifespan of you payback.
See if you have any forbearance available
Some lenders offer short term forbearance. If you are not struggling tremendously, and just need some short term relief, this can be a good option. Just remember that you will end up paying more in the long run because the interest will still incur during the forbearance period. This is an option worth considering if you truly need some relief for the short term. If not, it's best to try to accomplish what you want while continuing to make your payments.
If you are in need of more drastic help with affording your private student loans, a forbearance won't be all you need. Yes, you could be in a better spot financially and income wise by the time the forbearance period is over, but probably not so that it will be enough if you're struggling bad enough. To help maximize the help of a forbearance on your private student loan/loans is to try to find some part time work. If you apply everything you make from your part time job to your loans, you can pay them down faster without having to cut you living budget. Here is a good blog at credit.com on how to pay off debt with a side job.
Refinancing you private student loan
This will only be worth considering if you can get a better interest rate and payment. This will depend mainly on income, credit score, co-signer, debt-to-income ration, and length of employment. If you look good in all of these areas minus the co-signer, you probably have a decent chance of getting a good deal on a refinance. If you look good on most of these minus one or two but have a solid and credit worthy co-signer you may also be able to get a better interest rate and payment through a refinance. There is really only one real way to know for sure, and that is to explore this option if you feel you will on the plus side of most or in all of these areas.
Using a debt snowball to pay off private student loans
Use the debt snowball to lower your student loans. This can be an option that can save quite a bit on your overall payoff without any help or assistance from your lender or another financial institution. The debt snowball method, however, only applies to those who can afford their payments and ideally a little more. The method is simple and we give the steps below.
- 1) Pay a little extra toward your lowest balance student loan
- 2) Once you have paid off your lowest balance student loan, apply what you were paying on that student loan to your next lowest balance student loan
- 3) Once that student loan is paid off, apply what you were paying toward the two previous student loans to the next lowest balance student loan
- 4) Repeat these steps until all of your private student loans are paid off