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Student Loan Consolidation Pay Off Amount?

This question not only applies to student loans but most loans in general, I’m assuming.

Here’s the problem: I have a consolidation loan for $25k with repayment to be completed in 20 years, leaving a total pay off balance of $35k. The question is: if I make more payments now, will this decrease the total pay off balance?

If this is true why doesn’t everyone get a consolidation loan (that way you can have the security of lower monthly payments, if you need it) but then make higher payments thus decreasing the life of the loan?

Basically, people say to not consolidate because you’ll end up paying more in the long run. But I want to counter act this by still having the security of lower monthly payments but make the higher payments when I can afford them, and yes I do realize this will ultimately make the original loan slightly higher depending on the frequency I make larger payments, but it will not be as high as if I made minimum payments for 30 years.

If anyone has any advice or similar stories please let me know.

Thanks!

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One Response to "Student Loan Consolidation Pay Off Amount?"

  1. MobiusMind says:
    Herc,

    The problem with consolidation loans boils down to one thing: it changes the type of your loan from an UNSECURED loan to a SECURED loan. What does this mean? This means that if you ever miss payment or run into a rough patch down the road, the creditor is legally in the clear to take away your personal property in return for the loan.

    That’s the reason many people who have done large consolidation loans regret it to this day.

    One option that many people don’t really know they have is to get their loan balances reduced by negotiations with the creditor. Of course, you need an expert to do this on your behalf just as you’d have an expert change the transmission on your car. But the savings here could be potentially huge.

    If you check out http://www.ZeroBill.com there’s a case study on there of someone with about $30K of debt similar to yours where they ended up owing only $17K when all was done. I’d highly recommend this option before considering consolidating loans.

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