How does a student debt consolidation loan work?

If you leave college owing a few different lenders money from tuition, you should consider a student debt consolidation loan. This rolls all of your loans into a single larger loan, often reducing the interest rate in the process. Thus, rather than owing money to a few different companies, you will just make payments to one company on a loan with a slightly lower interest rate.

You should look into this option if you have more than one student loan and are about to start paying them off. Note that the typical student debt consolidation loan has no prepayment penalty, so you can pay it off early without having to pay extra fees. You can also extend the term of the loan, from 10 years up to 30, which may make payments more affordable for you.

It is a good idea to shop around when looking for a student debt consolidation loan because you can only consolidate once unless you go back to school and acquire more debt. Also, know that if you have several loans with one lender, you will have to consolidate only through them, which means that you do not have the option of shopping around for the best rate. Of course, the interest rate will likely be lower once the loans are all rolled into one, so you will still be getting a good deal.

You can visit various banks and credit unions near you to find the best student debt consolidation loan for your situation. Just check the terms closely first to ensure that they are favorable to you.