You might not realize that student loan consolidation interest rates are not created equal. Some companies offer far better rates than other companies, and you should shop around to try to find the best rate you can since it’s going to be locked in for the duration of the loan.
Considerations – Student Loan Consolidation Interest Rates
#1: The law requires a certain interest rate reduction.
Any company offering you a consolidation must offer you student loan consolidation interest rates that are at least 0.6% lower than your current rate. This is not a feature or a benefit, but it required by law. If the company advertises this interest rate reduction as a special deal, you’ll probably want to look at another lender. Since every company must offer at least this reduction, if that’s their selling point they probably don’t have much to offer. If they regularly gave rates below that reduction, they would advertise them.
Even with that minimum put in place by law, you can get a reduction that’s must more than that if you choose the right lender, so shop around for the best rate.
#2: Pay attention to what the market’s doing, but consider the length of the loan.
It’s definitely worth it, even if you already have a fixed rate loan, to look into student loan consolidation interest rates that are at least a point less than what you’re paying. With variable rate loans, consolidating improves your loan structure by giving you a fixed rate (all lenders are required by law to give a fixed rate on a consolidation). And even if you only get the minimum 0.6% reduction or not much more than that, it could still be worth it.
While you may worry that interest rates will drop in the future and you’ll end up paying more than you would with a variable rate long, thing of the long haul. If you have a 10-year repayment plan, the interest rate will almost certainly go above your rate during that time, which can help offset the feeling of paying too much when it drops.
#3: Make sure your rate discounts are permanent.
Some companies offer rates that are temporary or contingent on things like whether you continue to auto-debit your payments or whether you make every payment on time for the entire length of the loan. For the best student loan consolidation interest rates, make sure the rate reduction is permanent so you can’t lose the discount.