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No. of Recommendations: 2
Hello, I need help. I have been hearing a lot about consolidation, could someone please tell me what the benefits of consolidation are.

Right now I've been paying on Citibank and Perkins. I've just completed a foreberance on my Direct Loan to bring me current. I'm waiting to hear back about what my payments will be under the Income Contingent plan. My husband also has loans but we do not want to do a joint consolidation.

Thanks everyone for your help!

Citibank (Interest rates change, so far they've just gone down)
Loan One $3,000 7.75%
Loan Two $4,000 7.5%
Loan Three $3,500 7.0%
Perkins
Loan One $3,000 5.0%
Direct Loan
$28,500 at 5.99% and 6.79%
(Don't know how much is at 5.99 and how much is at 6.79)
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No. of Recommendations: 1
Go to the Direct Loans website. They have lots of information on the benefits and drawbacks of consolidation. Basically, the benefit is you spread your loans out over 30 years instead of 10 which lowers your payment. The drawback is you end up paying more in interest over the life of the loan because of the extended payment period. You also fix your rates rather than have them change. This could be good or bad.
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Adding to the advice given by Nathar and assuming half of your largest loan is at 5.99 and half at 6.79, your weighted average interest rate of the consolidation loan would be 6.625. Whether or not that will save you money can be calculated by running each loan through an amortization table and comparing the sum of your current loans against the new loan.

Microsoft Excel can do this for you -- or you can use the amortization calculator at www.bankrate.com.



CPAScott
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Thanks for the advice thus far guys!

I'm going to check out the calculator (since I don't have Excel) I'm hoping that it will help me to make a more informed decision about what to do.

Also, I want and am planning to pay off the higher interest loans early, well ultimately I want to pay them all of early, but the higher interest ones go first. Anyways, would having them consolidated work for or against me? (In terms of paying off early.) I'm really not good with figuring out percentages and calculating interest.

Should I consolidate all my loans or a few? Which ones?
Again:
Citibank (Interest rates change, so far they've just gone down)
Loan One $3,000 7.75%
Loan Two $4,000 7.5%
Loan Three $3,500 7.0%
Perkins
Loan One $3,000 5.0%
Direct Loan
$28,500 at 5.99% and 6.79%
(Don't know how much is at 5.99 and how much is at 6.79)
*Guessing that about $8,000 is at 6.79, since most of the loan were after 1998 and therefore get the lower rate of 5.99.

Oh and yes I just listed the amount that I borrowed, the figures do not include interest. There is about $3,000 more in interest, most of that being for the Direct Loans.

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I want to pay them all of early, but the higher interest ones go first. Anyways, would having them consolidated work for or against me?

Against you. If you remain unconsolidated you can pay off the higher rate faster and be left with the lower rate loan in the end. If you consolidate, you will just have one loan.
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No. of Recommendations: 20
Another thought. Some credit card companies will lower your interest rate, all you have to do is ask. (hopefully you're current with them)
Competition and the like is the reason for this.

Hope this helps.

Br (Been there)
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Go take up a hobby, and don't think about consolidating those loans til June 2002 at the earliest. Monitor the 3-month T-bill auctions if you want. Gardening is probably more fun.
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I agree with Nathar. Anything that's high and fixed, if it makes you that nervous, pay it off. I don't know if 7% is high (I can point you to people in the club here who were going "whoopie!" at 7% two years ago), but if you think you can't make better use of the money, pay the creditor.

DON'T TOUCH VARIABLE LOANS! Wait until next June to see how things are going, and wait til July if the rate has dropped again. Find a hobby; take up fly fishing. Just don't consolidate variable loans right now.
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Thanks W505a,

Not planning on doing it anytime soon.

And I tried gardening, I'm definetly NOT the green thumb one in my family. Think I'll stick with reading the Fool.
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I was trying to be humorous there of course. I just know, with all the mail and tele-marketing going on by student loan consolidation companies, to "lock in" to "today's low rates", that question is going to be popping up here all winter and spring.

I get these junk mails from some company, (they have a picture of a dog with a stick on the front.) They tell me about the "historically low rate environment" we're having right now (but not pointing out that the rates from last May---what I would be locking in as a customer---are precipitously HIGH compared to what is very possible for later in 2002).

So there have been other people, and will be yet more, who are going to ask about whether these things are deals now. For variable rate folks, the answer can only be "no".
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