Private Consolidation Rates & Terms

Private Consolidation Rates & Terms

Opting for a private loan consolidation enables you to take advantage of the fixed interest rates in the first place. But it may not be the same with all lenders. While some provide fixed rates, others adjust their interest rates either on a quarterly or on a half yearly basis on a private loan consolidation.
Interest Rate:
The interest rates are based on the London Interbank Offered Rate (LIBOR). A percentage of margin is added to the LIBOR index and altered every time there is a change in the index. This margin is generally between 2 to 3% initially. Some lenders disclose the margin percentage. After the first year, long term margin percentage is applied which is at least twice the initial margin rate. This results in a change in the interest rate applicable on the loan which is generally between 11 to 12%. A rate discount is offered on interest rate where the payment is made by way of an electronic debit from the savings account. It varies from quarter to half a percent.
Repayment Terms:
Repayment term is considered solely on the amount of loan outstanding. Where the outstanding amount ranges from $7,000 to $30,000 the maximum period allowed is 25years and where it is $30,000 and more a 30 years time span is offered.
Monthly Installment:
While the repayment time is fixed based on the loan liability, the repayment method depends on the financial condition of the borrower. On the one hand a regular principal plus interest method is available where the equated monthly installments include both the principal and interest right from the first installment and on the other hand an interest only repayment option is available where the monthly installment amount will include only the interest portion for the first 24 installments after which it is converted into principal plus interest method.
Private Consolidation:
Normally consolidation involves no processing fee. Depending on the credit score of the borrower a fee called origination fee is levied varying between 0 to 2%. On a successful 48 on time payments this origination fee is cancelled or waived if at all any amount has been levied
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Private Student Loan Consolidation: FAQs

A Private Loan Consolidation scheme has a certain procedure, presenting a step by step guide through the entire process and clarifying the common queries that arise in the process.
What is meant by Consolidating a Private Student Loan?
Students, Graduates and their parents are given an opportunity to reduce the complexities of handling a number of eligible private loans taken by them for educational purposes. Consolidation is a process by which the entire liability is reduced to one loan liability/payment accountable to a single lender at a lowest interest rate.
Who are eligible for a Private Loan Consolidation?
You should either be a student, graduate or their parent having one or more Private Loans not less than $7,500. You (including cosigner if any) are expected to have two years employment, verifiable residence and satisfactory credit worthiness, with a monthly income of not less than $1,500.
When can I proceed consolidating my Student Loan?
Immediately after all the eligible Private Loans opted for consolidation are disbursed you can consolidate.
What are the Eligible Loans for Consolidation?
Any alternative source of loan or a Private Loan incurred for the purpose of attending and studying in a qualified higher education program.
Is Consolidation allowed even if I have a Single Private Loan?
You are allowed to consolidate even a Single Private Loan to make use of the favorable interest rates offered under consolidation.
Can both Private and Federal Loan be consolidated together?
Federal Loan contains more favorable terms and advantages that are not available to Private Loan holder hence consolidation is not permitted. Both these loans can be consolidated separately.
How is the Interest Rate determined?
The rate applicable for a Private Consolidation is based on a prime rate namely the LIBOR (London Interbank Offered Rate) index to which a percentage of margin is added to arrive at the consolidation loan rate. After the first year a long term margin is added to the index rate to arrive at the loan rate. Discounts are offered for a direct payment debit from the bank account. These rates are generally fixed but are also subject to quarterly \ half yearly adjustments.
What is the Repayment term in consolidating Student Loan privately?
A maximum of 30 year period is allowed depending on the outstanding loan balance.
What are different Repayment options available for parents/students?
Payment of both principal and interest is one option and payment of interest portion alone for 24 installments and later converting into a principal plus interest is another option available.
Is there any fee for Consolidation?
No there is no fee for consolidation.