There are many ways to deal with defaulted student loans. One of the simplest ways to satisfy defaulted student loans is to consolidate all outstanding loans into one lump sum then refinancing that amount under a new interest rate and/or agreement.  With this in mind you may ask “Can I consolidate my defaulted student loans”?

A much better question might be; “should you consolidate defaulted student loans” or, “will it work for your particular situation”?  An individual’s ability to rehabilitate their defaulted student loan(s) is entirely dependant on two things; their current level of financial fortitude and ability to make regular payments.    Despite any assistance that a loan consolidation company might be able to offer, you have to keep in mind; they are in business to make a profit.  The simple truth is that they are not going to pay off and appease those seeking your student loan money without expecting something in return.  Some loan consolidation organizations might (in fact) use collection tactics that are just as harsh as those practiced by the government.

How does debt consolidation work exactly? Consolidation is to take two or more outstanding loans and refinance them into one.  To a person who is swamped with multiple student loans that have come due, loan consolidation is an enticing option. Each of these loans has their own restrictions, limitations as well as terms, agreements and interest rates.  In this situation, (where there are multiple interest rates) your long term amount owed might be either higher or lower depending on the specific terms of each loan.  So, consolidating can either raise your overall debt ceiling or it can lower it; it all depends on how the compounds over time.  When you consolidate your loans, you are essentially gathering them all into one lump sum; all accumulated debt will at that point, will be privy to the new long term interest rate.  This is why it is very important that you understand how your proposed loan consolidation agreement works.  Some organizations will have a lower interest rate than others; however, they may offer less perks than those with higher interest rates.  When you consolidate defaulted student loans, a lending institution pays off your existing balances and replaces them with a new, consolidated loan

What you should be looking for in a loan consolidation company:

●      Ability to lock in the lowest possible interest rate

• Assigns a fixed interest rate that is not subject to unexpected changes
• Select a low monthly payment that perfectly suits your budget and lifestyle
• Doesn’t charge fees or penalties for certain unexpected / unforeseen events
• Doesn’t have the power or authority to repossess your possessions as collateral

Be sure to thoroughly read every square inch of your contract / loan agreement before signing.  Missing one little clause could mean the difference between you losing or keeping thousands of your hard earned dollars.  This is why it’s probably best to get a lawyer or accountant to look things over, just to make sure that you are getting a fair deal; you are after all, paying them thousands of dollars for a long term service.  If the details of your loan agreement are satisfactory, then you should feel free to sign.  Congratulations, you just effectively dealt with your loan debt issues!  Here’s to the future!

This entry was posted on August 16, 2011 at 3:02 pm. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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