There are several options when it comes to managing the repayment of federal and private student loans. Taking the right decision can help you save scores as the monthly repayment amount can be reduced to a substantially lower amount.
Out of the available options student loan refinancing can be a practical decision to take, especially when the monthly repayment amount soars high enough to make it almost impossible to pay off your daily needs.
Although there will be a considerable reduction in the monthly payment by exercising the refinancing facility, it should also be remembered that it will increase the payment time period which means longer debt burden. Pay off the existing student loan is the best decision to take but in case it becomes impossible to make faster and timely payments then the facility of loan refinancing needs to be given a serious thought.
Private vs. Federal consolidation
Students requiring applying for financial assistance should definitely include student loan as a part of their financial aid package. But it is necessary for them to understand which type of loan will provide them with the best borrowing option. Generally a student loan is available in two different types, one being the federal student loan and the other being the private student loan. While the former is funded by the federal government the latter is non-federal in nature and mostly made by union or state agencies, banks and money lenders. Both the borrowing options can lower the repayment amounts to a substantially lower level but in their own different ways. The federal consolidation option provides flexibility of payment along with a long term opportunity for repayment while the private consolidation option can lower the rate of interest, thereby lowering the monthly payment that needs to be made. However, the private consolidation option is not available to those with a poor credit repayment history. To get detailed information about the possible borrowing facilities users can have access to various online sites like financial hot seat to know more about them.
Which option is better?
While most people know the basic difference between a federal and a private consolidation they fail to decide upon which loan facility is the best for them. For this they often try to take professional financial advice to help them reach a conclusion. A reliable source from which genuine and helpful advice can be obtained is the financial hot seat where potential borrowers can come to a conclusion relating to their nature of borrowing. It is more helpful for students who are yet to be introduced to the financial provisions of borrowing money from the market. Both the private and the federal borrowing options have its own set of pros and cons which are observed while exercising the borrowing facility at different situations. So, it is a bit difficult situation to establish the fact that one borrowing option is superior over the other as most of it depends on the circumstances under which such option has been exercised.