Myths on consolidation of loans

There are several myths on loan consolidation that create a lot of misconception among people. They should be dispelled for the benefit of those who have decided to consolidate their loans.

The first myth is that consolidation of student loans is extremely complicated. The truth is that it is not. It only appears so because of the various types of eligible loans, repayment procedures etc. The borrower, in fact, has little to do except providing basic demographic information, listing his/her loans and signing the paper. The rest is done by the lender. Another myth says those who consolidate are no longer entitled to any type of deferment. In reality, borrowers keep the core deferments which are important for student loan repayment, economic crisis, and unemployment deferment eligibility. Belying yet another myth, it should be made clear that while consolidating, borrowers do not have to extend their repayment period and pay more interest.

Borrowers consolidate knowingly

There is also this misconception that only those who can’t manage their money consolidate their loans. Far from true. Borrowers want to utilize its several plus points, such as reasonable fixed interest rates, easy repayment options, and single-billing advantage. And contrary to what many people wrongly believe, loan consolidation does not mean life-long debt and too much interest; it is done just to ensure a fixed interest rate and keep their repayment terms at 10 years or so. People also tend to believe that online loan consolidation is a better option. Fact is, as it is a complex affair, one should always consult a qualified professional to know about the repayment options and other things.

Private educational debt consolidation possible

Another myth is that consolidation of private educational debt is not possible. But there are select lending agencies that offer private consolidation loans. A borrower should choose one with low rates which can also consolidate private and federal student debt with a single loan. There is also the misconception that those consolidating loans cannot change their payment plans after the loan is complete. In fact, they can yearly alter their payment plans. They also have the option of making extra payments at any time, which cuts down both interest and duration of repayment. And never believe the myth that all consolidation loans are created equal. Actually, loans and their terms vary widely and depending on the lending agency, one can get benefits like discounts for on-time payments and automatic debit.