Switching Companies After Consolidating

There are a number of advantages to consolidating your student loans, but are there any to switching companies after consolidating?

The initial advantages of consolidating or refinancing are well known. The first is that - rather than dealing with many lenders with different repayment schedules - you will deal with only one with a single, affordable monthly payment. The second advantage is that by consolidating your loans you will usually be able to restart some of your deferments, and the third is that you can almost always extend the term of the loan.

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While consolidating will increase the total cost over the full loan term, it will reduce the size of the monthly payments. It will also allow you to convert your loans from uncertain adjustable interest rates to a single, safe fixed rate. With interest rates on the rise this can mean a valuable saving. But what about switching companies after consolidation?

While the interest you pay on a consolidated loan may not vary between companies (most offer the same fixed rate of interest) there can be advantages to switching loan providers. In order to attract your business, many providers offer incentive programs that offer a reduced rate of interest once you have made a certain number of on-time payments. While at first glance these may seem like nothing special, when you sit down and do the math it is clear that these programs can cut enormous chunks out of the cost of your loan. At least one consolidation company actually offers 3.33% reduction in the balance of your loan after 30 on-time payments. Not counting interest, this would offer a $660 discount on a $20,000 loan.

So, there are clear advantages in switching companies after consolidating. The trick, though, is to make sure you choose the best company. To help you with that job you should speak to a qualified loan adviser.