Everyone has things about his college experience he tends to throw out after graduation. Whether it was the pictures of the spring break in Panama Beach or the textbooks you couldn’t sell back, we all have things we want to put behind us as we head out into the work force.
Student loans however, no matter how small, cannot simply be forgotten. Student loans were so easy to get in college, and so easy to forget. Your first bill may arrive right after you graduate, ushering in your new bill-paying, over-financed life.
You also may have a hard time paying off your loan if you’re too busy paying off the credit card you were given a t-shirt to apply for. Luckily, borrowers now have the opportunity to receive some of the best student loan consolidation fixed interest rates ever.
By consolidating, borrowers not only reduce their long-term debt but also can help change their credit score for the better over time. An improved credit score will be important when a person enters the working world and wants a new car, apartment, or charge card. Here are some tips for borrowers that can help them as they enter the job market.
More Open Accounts = Lower Score: Over a borrower’s life, he may have taken out up to eight separate loans to pay for school. Each of those loans has a different payback amount, interest rate, and payment terms. The more credit and loan accounts a person has open, the lower his overall credit score. Though by consolidation, older accounts will be merged into a single account, thereby lowering the amount of open credit lines on a credit report.
Lower Payments = Higher Score: When a credit report is evaluated, the total amount of a borrower’s monthly minimum payments is taken into account. When you have multiple loans, each of the payments is part of a borrower’s monthly payment obligation. Borrowers who consolidate have only one payment to make, which is typically lower than the minimum amounts of the separate loans.
Your Debt To Credit Ratio – It Matters: Credit bureaus typically determine if you’re in debt by evaluating the amount of your available credit you actually use. If you have a total of $10,000 available on three credit lines and you owe $2,000, your score will be higher than if you have maxed out your one credit line with a $2,000 limit. If a borrower has multiple loans with a maximum used, it will reflect negatively on the person’s credit score. So it is important to consolidate accounts in order to reduce the number of open accounts being used.
Consolidation can help most borrowers in many ways, but rates won’t stay low forever. They are so low now; the only place for rates to go is up. If you are on your way out of school, you’ll need to save every cent you can in this tough job market.
Take the time to call lenders such as American Collegiate Financial Services, Nelnet or Sallie Mae who will employ lending counselors to help determine if consolidation is right for you. Borrowers have more than their long-term payments at stake, but also their credit health as well.
Jose Vazquez, a graduate of Western Illinois University, has been awarded 27 scholarships, amassing more than $125,000 in aid to date. He is the author of the book "Free Cash For College: The Everyday Students Guide To Financial Aid." Vazquez is also a public speaker that gives seminars on financial aid and scholarship strategy for universities and corporations interested in work-life initiatives.
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