There are debt mistakes that many make. Student loan debt consolidation is popular among graduates, who leave college but have a particular number of loans. Banks and other financial institutions say that debt consolidation is the only reasonable decision but you have to know about the drawbacks of this financial operation.
Student loan debt consolidation is the operation when a student applies for a large loan to pay off small debts. A new consolidation loan comes with the new interest rate, a new term, and new conditions in general.
There are two ways to apply for a student loan debt consolidation: federal and private.
Both variants have advantages. Federal financial resources such as LoanConsolidation.ed.gov offer fixed interest rates (usually no more than 8.25%) and most of the student will qualify for their loans.
Private institutions have variable interest rates and they can change during the repayment period. So, you can apply for a debt consolidation for a bad credit with a low-interest rate, which will increase substantially in a month, for instance. It’s quite risky. Furthermore, private lenders are known with their high requirements.
Not every student will qualify for them. Though the situation with other loans differs, it’s easier to qualify for federal student loan debt consolidation offers.