It can also be a way to get into repayment plans you otherwise wouldn’t be eligible for.
But that doesn’t mean consolidation is always a smart move.
Each of them may have different terms, including interest rates.
Why, you may wonder, would you ever leave a high-interest item out of a debt consolidation?
If you consolidate your loans now, your new rate will be based on a weighted average of all your loans’ interest rates.
So, for a simplified example, if you have two loans, one for ,000 at 4% interest and one for ,000 at 6%, your consolidated loan will have a ,000 balance and a 4.7% interest rate.
Here are four things to consider before you make the leap.
NEWSLETTER: COLLEGE_PLANNERSign up for COLLEGE_PLANNER and more View Sample 1. One of the myths of consolidation is that it makes your debt less expensive by lowering your interest rate.
Isn't that the point, to pay off high-interest items by consolidating them?