August 25, 2015
Getting started on a consolidation application online is simple, but borrowers sometimes face unforeseen challenges on their first attempt and get discouraged. If you have an outstanding private student loan with a high interest rate eating up your paycheck every month and want to get rid of it, a consolidation may be the right move. Here are considerations to see if you qualify.
1. Personal Credit:
When was the last time you applied for credit, or took a look at your credit report? There may be unresolved issues reducing the overall score. Victims of identity theft are sometimes unaware of the crime until they apply for new credit and get denied over accounts that were fraudulently opened. The good news is that over time credit issues can be resolved and individuals can increase their score. If a consolidation applicant initially gets denied, they can follow a plan of action to improve credit and reapply later to get approved.
2. Did you graduate?
Many private student loan consolidations require the borrower to supply proof of graduation. Usually a copy of the Degree or an official transcript are enough proof. Until the student actually graduates, they may not be able to gain access to a private student loan consolidation. This is especially unfortunate for students that may have borrowed private loans to start college, but failed to finish. They would be left with a choice between paying back the current loans (With maybe a high interest rate) or getting back into school to graduate and qualify for consolidation later.
3. Are you employed?
Students attend college with the intention of getting a job after graduation, and trade off the time that could be spent working with going to class for four or more years. While college graduates generally have half the overall unemployment rate of high school graduates, there has still been a marked increase in unemployment for more recent college graduates since 2008. A private loan consolidation can only be approved once the applicant is gainfully employed making a minimum monthly income, and will require proof of income most commonly found in the form of two recent pay-stubs. Even if the borrower has “good” credit and a cosigner, a lack of employment or sufficient monthly income can block approval.
4. Will you need a cosigner?
If you applied for a consolidation, and qualified for a rate higher than preferred, gaining a cosigner may be necessary to earn the lowest rate available. But this request comes with responsibility. The cosigner plays an important role, as their credit is combined on the application with the primary borrower. If the primary borrower is unable to pay the the loan back, full responsibility of repayment moves to the cosigner.
Choosing the right cosigner can make a big difference in consolidation applications, so make sure to thank yours if you actually have one. While it usually ends up being the parents, anyone can actually be a cosigner so there are cases where grandparents, aunts, uncles and spouses have signed on.
5. You’re approved! Now get your loan payoff letter…. wait what is that?
A loan payoff letter is a document produced by your lender stating how much it would be to pay off the loan completely (including principal, interest, fees and penalties) within a certain amount of time, usually 30 days into the future. Depending on how responsive your current lender is, this letter may be available instantly, or it may take a few weeks, or it may take far too long. Just remember, the longer it takes a lender to produce a payoff letter, the more time they can keep your loan on their books and continue to collect interest, so keep following up until it’s received.
Work with your lender’s online billing portal to see if a “Loan Pay Off Letter” can be made available online. If not, you will need to contact their customer service to get it processed. Be advised, a copy of your current loan billing statement is not an official “Pay Off” letter and would not be accepted by a consolidator.
Please note that the information provided on this website is provided on a general basis and may not apply to your own specific individual needs, goals, financial position, experience, etc. LendKey does not guarantee that the information provided on any third-party website that LendKey offers a hyperlink to is up-to-date and accurate at the time you access it, and LendKey does not guarantee that information provided on such external websites (and this website) is best-suited for your particular circumstances. Therefore, you may want to consult with an expert (financial adviser, school financial aid office, etc.) before making financial decisions that may be discussed on this website.
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