Student loans are usually obtained to fund ones education as a student and assist in other important school expenses. Before you apply for any loan at all, you must bear the following points in mind: -1. You should first ask yourself if you really need the loan and the amount you may likely require to support your education. To do this make a list of what you need and the amount you will need to cover your education.2. Do a random sampling to get those who offer loans with their terms and conditions including interest rates.3. Seek the assistance of financial advisor to guide you on the best type of loan.4. Select the best option after careful consideration of terms and conditions for loan repayment.5. Make sure you understand the terms and conditions before you enter into the agreement.Consolidation loans allow students to merge many loans into one single debt and it is always at certain Student Loan Consolidation Interest Rates. This will lead to reduction in the monthly repayment. However, the loan will take a longer period to offset. As the loan reduces the monthly repayment of the student, it will increase the cost of the student’s loan debt.Student loan consolidation is of many benefits which include: -1. improved credit rating.2. longer repayment period depending on the amount being consolidated (10-30) years.3. The monthly repayment is often less than the total payments made to the separate loans.This rates on students loans debt consolidation is calculated using the weighted average of the interest rates on the loans being consolidated. The result is being rounded up to 1% to 8.2% maximum. This rate for the loan consolidation is an average of it that is being consolidated.Student loan consolidation interest rates have various calculating methods depending on the type you apply for. There is one that is normally applied for through the school authority and the other type is the direct to the consumer private loans. The former is certified by the school authority and attract lower rates on interest. The disadvantage of this type is that it takes a longer time to process. The later on the other hand attracts higher interest rates but its assessment is faster.The weighted average in Student Loan Consolidation Interest Rates is being calculated by multiplying the total loan amount by the current interest rate. Assuming a loan balance is $20,000 with an interest rate of 5%, multiply 20,000 by 5% to get $1,000. Again, let us take the second loan to be $10,000 with interest rate of 4% which gives $400. Add the first and second computation together and divide the result by the total loan balance of all loans taken together.
Therefore: -Total loan balances = $20,000+$10,000 = $30,000
Total loan Interest = $1,000 +$ 400 = $1,400= 1.400/ 30,000 = 0.046
To get the percentage rate, multiply this figure by 100Finally round the rate to the nearest one eighth of one percent.
Therefore, the Student Loan Consolidation Interest Rate will be 4.6%From the computation above, total cost of the consolidated loan as well as the monthly payments could be established.
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Effective Computation of Student Loan Consolidation Interest Rates
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