When you pay your credit cards down regularly, you benefit from making on time payments, as well as from the fact that you keep down the amount of credit you are using relative to how much you have available. Since an installment loan is paid off over a set period of time, you don’t get the credit boost from debt utilization.The benefit of an installment loan is that you can show you can manage your credit responsibly over a long period of time, seeing a good credit history as well as loan diversity and regular payment.
Instead of making multiple payments to multiple lenders, the borrower only has to pay off the new consolidation loan, says Michelle Pezzulli, vice president of operations for Credit Union Student Choice, a student lending service provider in Washington, D.C."That new loan will have its own interest rate; it will have its own repayment terms; it will have its own terms and conditions," she says.With student loan consolidation, you may be able to refinance at a lower interest rate, decrease your monthly payment, or both!When you apply, most banks and lenders will look at your credit score, annual income, savings, and college degree type (or certificate of enrollment if still in school).If you have a private student loan, that means you borrowed money from a bank, credit union or other entity whose funds are not backed by the federal government.
You will undergo a credit check if you apply for a private student loan, so if you don’t have good credit or any credit history (as is often the case with college students), you will need someone with good credit to cosign your loan.
Here's what you need to know before deciding to consolidate student loans.
Loan consolidation is when a borrower takes out a new loan to pay off several smaller student loans.
If you meet these requirements, you might be an excellent candidate for student loan refinancing and consolidation!
If you don’t think you meet the requirements, don’t worry – as you can apply with a cosigner to increase your chances of getting approved for a better student loan.
Loan terms and repayment options vary widely by lender and borrower.