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"Smart Loan" is similar to the Direct Consolidation Loan we've been talking about. Hit some of the earlier posts that look like they're on the topic---or do a search.

The general theme has been that the government is offering a .8% discount on consolidations, and so some of the third-party (private) lenders like Sallie Mae have also been putting out their deals.

If you extend the amount of time you have in order to pay off a loan, your monthly payments can be less. If I lend you $120 (at no interest) and give you one year to pay me, you can pay me $10 a month. If I do the same, but give you 10 years to pay me back, you only have to pay $1 a month. It's that idea.

In all cases, when you extend the loan out, you pay more interest overall. That's because the money was being borrowed for a longer time period. (I didn't charge interest in the example above, but the student loan lender does.)


My view is, you always take the longest term possible if the rate is a favorable one (like if you get 5 or 6%). If you are concerned about "being in debt forever", you can use the extra that you didn't have to pay to set up a savings fund or put it into a money market mutual fund account. Then, if you decide you really would rather pay the remaining balance of the loan ahead of time, that money is still there.




g it into a savings account or a low-risk mutual fund.
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