Federal Student Loan Consolidation: The Other ReFi Boom

Written by Elizabeth Belli


You've heard about refinancing inrepparttar mortgage market. Who hasn't? Interest rates are at all-time lows. Folks have refinanced two and three times in as many years to save thousands of dollars in interest they would have otherwise paid.

There's a similar lesser-known boom happening inrepparttar 112698 world of federal student loans. Refinancing or consolidating them can also help borrowers save thousands of dollars in interest expense, and consolidation can cut a borrower's monthly payments down to a size that's much more affordable.

The two most common types of federal student loans available today are Stafford loans (for students) and PLUS (Parent Loans for Undergraduate Students). The variable interest rates on these loans arerepparttar 112699 lowest they have been in over 30 years - currently, Stafford loans carry a variable rate of 3.46% whilerepparttar 112700 student is in school, deferment and grace, and 4.06% in repayment. PLUS loan interest rates are currently 4.86% regardless ofrepparttar 112701 student's status. If those rates would hold overrepparttar 112702 standard 10-year repayment term, that would berepparttar 112703 end of this story. But, they won't hold. Federal student loan interest rates reset every year on July 1; Stafford loans rates can climb as high as 8.25% andrepparttar 112704 PLUS cap is 9%.

The great news for borrowers is that consolidating these loans locks in a low interest rate. The formula for determining a Federal Consolidation Loan interest rate is to takerepparttar 112705 weighted average ofrepparttar 112706 interest rates ofrepparttar 112707 loansrepparttar 112708 borrower wishes to consolidate and round it up torepparttar 112709 nearest 1/8%. So, for example, if a borrower had only Stafford loans in repayment issued since July 1, 1998,repparttar 112710 variable interest rate on these loans is currently 4.06%, andrepparttar 112711 fixed interest rate for that borrower's consolidation loan would be 4.125%. That's 4.125% forrepparttar 112712 life ofrepparttar 112713 loan -which can be up to 30 years depending onrepparttar 112714 borrower's level of indebtedness.

Now, that's a deal every person with student loans should be considering right now. Because on July 1, interest rates reset.

And there are other advantages to federal student loan consolidation. With extended repayment and graduated repayment options, borrowers' monthly payments can be reduced by 50% or more -especially helpful to recent graduates trying to make ends meet. And, if a borrower has multiple lenders and multiple monthly payments, consolidation letsrepparttar 112715 borrower make a single and (generally) a lower payment to a single lender - simplifying bill payment and improving cash flow. Finally, federal student loan consolidation is free - there are absolutely no fees to consolidate.

Althoughrepparttar 112716 terms of a Federal Consolidation Loan are exactlyrepparttar 112717 same, regardless of who lends yourepparttar 112718 money, a number of lenders are offering incentives to get borrowers to consolidate with them. And, these incentives can save borrower hundreds, even thousands of dollars in additional interest. Most common is a .25% interest rate discount when borrowers agree to repay their new consolidation loans electronically (direct debit). A more significant discount is offered by some lenders when borrowers make timely monthly payments on their new consolidation loans. For example, ConsolidateYourLoans.com offers a 1% interest rate reduction afterrepparttar 112719 borrower has maderepparttar 112720 first 36 consolidation loan payments on time. Other lenders offerrepparttar 112721 same discount after 48 or 60 payments, and others offer lesser discounts at other payment intervals, butrepparttar 112722 idea isrepparttar 112723 same. Just keep in mind,repparttar 112724 faster you getrepparttar 112725 discount and largerrepparttar 112726 discount is,repparttar 112727 more you can save.

What's Your Credit Score? (and what does it mean?)

Written by Carole Talley


Anyone applying for a mortgage will probably hearrepparttar term "credit score" mentioned at least once, and you'll ask "What's my credit score?" Depending on where you live, you may or may not get a straight answer. Some lenders or credit companies may tell you that they cannot legally release it to you, which is not true. The law does not prohibitrepparttar 112697 release of this information. However, in most states, lenders and mortgage professionals are not required to tell you even though many times that isrepparttar 112698 primary consideration being used when extending or refusing you credit.

A "credit score" can carry a lot of weight. It can be used to determinerepparttar 112699 size of your loan,repparttar 112700 terms on whichrepparttar 112701 money is lent to you (i.e. interest rate, length of time to repay, and whether or not you're offered a long-term fixed or short-term variable rate),repparttar 112702 amount of related fees, and your ability to purchase mortgage insurance. Inrepparttar 112703 long run, your credit score can cost you quite a bit of money.

For example, inability to purchase mortgage insurance could mean that you'll have to bring a larger downpayment torepparttar 112704 closing table when purchasing a home. Or, an individual with low credit scores can expect lenders to charge him higher interest rates becauserepparttar 112705 lenders feel they are taking a greater risk with him.

Lenders are concerned with only one question: "will you repay me as agreed or will you default?" Credit scores are considered good predictors of a consumer's ability and willingness to repay. A lower score predicts that you're more likely to default, so they charge a higher fee (interest rate) to loan yourepparttar 112706 money. That higher interest rate could make a big difference inrepparttar 112707 amount of money you pay out each month for housing and that translates into thousands of additional dollars paid overrepparttar 112708 life of your loan.

If your credit score is really low (520 or less), it can even berepparttar 112709 single determinant used to deny your loan application without considering anything else about you or your credit situation. So, as you see, your credit score can be very important.

The state of California recently passed a law mandating that credit score information be given to prospective borrowers if they ask for it. Other states, as well asrepparttar 112710 federal government, are considering passing similar legislation. So, if you're in California and applying for financing, ask for your credit score and an explanation of how it's being applied to your application. Forrepparttar 112711 rest of us, here's more information about credit scores and ways to improve yours as much as possible.

A credit score (also called a FICO score) is a computer-generated numerical grade given to each consumer based on a wide range of criteria. This grade is used by lenders to predict their risk in doing business with you by analyzing your past behavior. FICO scores are generated and released throughrepparttar 112712 big three credit reporting bureaus. Each bureau has a name for its credit/FICO score. They are as follows: Equifax calls it a Beacon score, TransUnion calls it an Empirica score, and Experian (formerly TRW) calls it a Fair Isaac score. FICO scores can change day to day depending on what information is reported torepparttar 112713 credit bureau(s).

The information used to calculate your credit score is widely varied, but each factor is given a numeric equivalent and added intorepparttar 112714 equation. Some ofrepparttar 112715 thirty or so factors used to figure a FICO score are: time onrepparttar 112716 job; how long you've lived at your current address; how many and what types of accounts you have; how high your account balances are; how much unused credit you maintain each month;repparttar 112717 age or newness of your accounts; and of course,repparttar 112718 negative factors such as too little or too much credit, too many inquiries inrepparttar 112719 last 90 days, late payments, collections, consumer credit counseling, judgments, bankruptcies and foreclosures.

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