Start Is consolidating your bills a good idea

Is consolidating your bills a good idea

Debt consolidation companies act as an intermediary when paying off your debt. The company will take a portion of your payment as a fee for acting as the intermediary.

Change your variable interest rate loan to a fixed-rate loan.

While federal student loans are fixed-rate, private loans can be either fixed-rate or variable.

Consider your options carefully before you take out a loan--consolidating your debts makes sense only in certain situations.

The higher the interest rate on your loan, the more you pay in the long term and the longer it will take you to pay off the debt.

Consolidation can actually wind up costing you money in the long run (see section below), so be sure you understand exactly what you’re getting into before you consolidate just to lighten your monthly paperwork. Reducing your monthly payments can help you in the short term but may wind up costing more in the long term.

If you extend your repayment terms from 10 years to 20 years in order to get a lower monthly payment, you can wind up paying tens of thousands of extra dollars in interest over that longer time period. Depending on the lender that you select, you may or may not be charged an origination fee of anywhere up to 2 percent.

If you refinance $50,000 in student loans and your bank charges an origination fee of 1 percent, you’re looking at paying an additional $500.

You won’t have to pay this straightaway — it will be tacked onto the balance of your loans — but it add to the amount you’ll be paying back in total. Many of the Student Loan Hero lending partners don’t charge any origination fees. Some loans come with borrower benefits like principal rebates, interest rate discounts and loan cancellation benefits, which can help reduce the overall cost of paying back your loans.

You want to consolidate multiple loans into one easy payment.

The average Student Loan Hero user carries 7 loans with 2–3 loan servicers. Consolidating can provide you with one easy-to-remember payment deadline and make it easier to track how much you owe and to whom. With no steady income and little to no credit history, many students find themselves needing a co-signer to qualify for student loans.

By extending the repayment term, you can significantly reduce the amount of money you’re required to pay each month.