It would be nice to think that a college education provides the spring-board to a financially secure future. But the sad truth is that getting that education usually puts the graduate on a back-foot financially, with debts of tens of thousands of dollars to repay before they even begin their careers. Many turn to student loan consolidation, with bad credit scores affecting the terms.
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The debt that a typical student can accrue while studying is as much as $30,000, though depending on the college attended it can be more than $50,000. So, finding an affordable consolidation program can be a lifesaver. But there are different options out there.
It is not just a matter of finding a consolidation company willing to take on such a large debt. It is also about finding the best terms, and avoiding the debilitating interest rates and repayment schedules that normal student loans can come with.
Choosing student loan consolidation, with bad credit a feature or not, is often viewed as the wisest way to restructure student debts. That is, after all, the core point to consolidation, which literally means to bring a number of aspects together in order to create a stronger position.
Financially speaking, that means pulling all of the independent debts together and paying them off with a single loan. But by replacing 4 or 5 (or even more) loans with a single loan, savings can be made. The trick to making the plan work though is to find an affordable consolidation program that maximizes the available benefits.
When there are 4 student loans, there are also 4 different interest rates and monthly repayment dates. But multiple interest rates mean more is paid in interest on the sums owed. Replacing them in a single rate, even on a large single loan sum, means less is paid. Thus savings are made.
Additional Benefits of Consolidation
So, what other advantages are available? Well, even when opting for student loan consolidation with bad credit, it is possible to agree repayment sums that are much lower than the original combined repayments. This effectively means that more cash is freed up every month to improve your overall lifestyle.
For example, the combined repayments on 4 loans may be $800 per month, but under the terms of the consolidation loan, the repayments on the total debt could be reduced to just $400. An affordable consolidation program ensures that money is saved.
Making it so, however, means accepting a longer loan term. So, instead of repaying the total student loan balance of $50,000 over 5 years, the consolidation loan can be repaid over 10 or 15 years. In fact, depending on the size of the debt, terms can stretch to as long as 30 years.
Consolidation Before Bankruptcy
For many people, bankruptcy seems to be the only option when debts get too much to handle, but this is not always the best course of action. There is a great advantage to choosing student loan consolidation, with bad credit borrowers better able to recover their credit reputation.
Basically, the effect that bankruptcy has one a credit history is severe, with the stain of the ruling sticking to individual records for as long as 10 years. In many cases, credit is not granted for at least 3 years – in some cases 5.
However, an affordable consolidation program ensures that all debts are repaid, thereby improving the credit score. So, if anything, clearing student loans through consolidation benefits the score and does not damage it.