Pros And Cons Of Student Loan Consolidation

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Student loan consolidation is a basically financial facility for the students and helps them repay their debts or student loans faster. It simply means to merge all the loans of a student and combine them into a single loan, which may be at a lower rate of interest so as to help the student. Like any other system each has some flaws and some advantages here also there are many pros and cons of student loan consolidation. The following are the pros and cons:

The advantages of student loan consolidation:

The creditor bank gets the full principle amount at once and so it I very advantageous to the banks, but as we al know the number of people filing or bankruptcy are becoming more and more by the day, so the creditor may be in loss due to that. So the creditor bank will not mind, that which party is paying your loan back as long as it gets the money back.

The student loan consolidators are also in advantage as they have got a student loan sold and student now is paying them instead of the banks, the loan rates may have been decreased but the term is extended so that the student is relieved of burden and has to pay less every month. Also they get a lot of goodwill, the student loan consolidators, not to mention as they rise in potential for the business the students after graduating may prove helpful to them too in return. Also in this business as they sell one loan more students will be coming to them for the same and may prove much healthy for their business.

Thus the student with the help of student loan consolidation is able to get better terms to his advantages and as his burden is relieved and he is able to make the most of his time and also he can spend on other things to his hearts desire and keep in mind about his career also with the reduction of financial worries, imagine what becomes possible for the student. As a result students live a more happy and contented life and thus more productive for the whole economy.

The disadvantages of student loan consolidation:

The student loan consolidation may look advantageous for the student but in the longer term it may turn out that he is paying the same amount or even more than the earlier decided amount. Student loan consolidation is just a way of arranging the loan and changing the terms but the main fact still remains that you need to pay back the loan, in many cases the creditors do not budge and may not make terms better for the student loan. So you need to get a better creditor also. In most of the cases the student loan is spread over the time period making payments smaller but still over a longer tenure of time. It may be that the rate of interest may be more than the original loan rate of interest.

Also it may be tedious for the student to commit for longer period of time and may get bored of much long commitment.

As the student is now much free from finance burden he may over spend and may not learn the true value of money. He may make the mistake of taking another loan to repay the old one.