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Debt Relief – Insolvency – Bankruptcy Information » Student Loan Help » Which student loan consolidation plan would be better?

Which student loan consolidation plan would be better?

I’m applying without a co-signer and wish to lower my monthly payments (I’m paying about 5 banks right now, every month.)

FIXED Interest rate 13.45%
14.10% APR
5.00% Loan Fee
$398.73 Monthly Payment

OR

VARIABLE Interest Rate 11.06%

3.06% Index–3 Months LIBOR
8.00% Margin
11.64% APR
5.00% Loan Fee
$330.49 Monthly Payment

I realize these rates are a bit ridiculous, but I am backed into a corner. I don’t really want to ask anyone to cosign for me, and I dont want to keep paying $600/month over various banks.

What would you do? Or should I try another bank?

Thanks.

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4 Responses to "Which student loan consolidation plan would be better?"

  1. Mr_Roboto says:
    FIXED.

    DO NOT use a variable interest rate loan plan for student loans. That $330 a month ISN’T going to stay $330 a month and will increase over the years as often as is allowed by law/terms of the loan.

    Is this through a private consolidation program with a bank? You may look into using the governments sallie mae instead. And if your payment is that high, is that a 10 year? Try going for 20 year fixed (if you have typically $30,000 or more total in debt).

  2. chula_rica21 says:
    Is this for you to continue to go to school? If so have the school you were going to combine them— Or you can even try to go through Chase Bank and take out a loan to pay them off —if ur credit is pretty much good to excellent they’ll finance you up to $30,000 then u’ll only have to pay Chase.
  3. Mommy of Three says:
    I wouldn’t use a bank, personally–I would consolidate with a student loan company. That way, your loans are still STUDENT loans, which (not to be morbid) are forgiven if you die or under other circumstances, while a loan from a bank will have to be paid by your estate or (if you’re as broke as I am) by your loved ones. Also, student loans qualify for forbearance and that sort of thing, which a bank loan would not. They also tend to have much lower interest rates than a bank loan, because they are partially covered by the government.

    I like Direct Loan, my husband likes AES. We both despise Sallie Mae–they are forever losing paperwork and charging fees that you do not owe, and their customer service is a joke. You just call up the company you choose (or visit their website–I filed my consolidation online), tell them you want to consolidate your student loans, and they’ll walk you through the process. Then, if you’re struggling financially, ask about an income-based forebearance–we both have our loans in forebearance while I’m staying at home with our new babies, and it was a really easy process. My consolidation did not need a cosigner, and in fact I don’t think the loan companies turn you down for a consolidation.

    If you are determined to do the bank loan, which again I do not advise, I would suggest talking to a good accountant about what the difference will be over the life of the loan. I would be tempted to take the fixed rate loan, though, because it would stay the same no matter what happens with our shaky economy, but I don’t know enough about interest rates and current market trends to be sure that it’s the better route over the long term. Good Luck!!

  4. zygote222 says:
    It looks like almost a complete wash to me. The variable loan is currently a better deal, but only because the 3 month LIBOR is unusually low right now. The break even point is when LIBOR rises to 5.45%. As you can see from the following link, the 3 month LIBOR has been above that rate for about half of the past decade. So, you can reasonably expect the variable rate loan to be more expensive than the fixed rate loan at some time in the future.

    My personal preference would be to go with the fixed rate loan. That’s because you won’t be risking a sky-high interest rate if LIBOR rates ever reach the double digits.

    As you seem aware, neither of these loans offers particularly good terms. It couldn’t hurt to shop around a little before deciding.

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