If you search the Internet for “student loan consolidation,” you will be presented with a long list of companies. Each of these companies seems to offer the same benefits like simplified finances, lower monthly payments, and fixed interest rates. You start researching a few of these companies, but are not sure what you should be looking for. This is a major financial decision, and it is important that you choose the right company.
Every borrower should interview at least a few different student loan consolidation companies. Yes, the Internet provides a wealth of information about the company’s services. However, you still need to speak directly to a company representative. Only then will you get a true feeling and understanding of how this organization operates. After all, they will be handling thousands of dollars for you. Here is a list of criteria you can use to help choose the right consolidation company for your financial needs:
- Customer Service – At some point, you will have questions about your consolidated loans. Speaking with different companies will help you get a feel for the type of customer service they provide. Did the representative rush through his sales pitch or did he take the time to understand your financial situation? These companies are on their best behavior as they pitch products to prospective clients. You will be able to see first-hand how they treat their customers.
- Knowledgeable – Consolidating your student loans can be tricky. Certain loans will lose their forgiveness policies while other loans will lose borrower benefits. As you talk with the company’s representative, gauge their understanding of the student loan market. Let’s assume that you want to consolidate some of your federal loans, including your Perkins Loan. Through your research, you know that you will lose the valuable teacher loan-forgiveness policy if you consolidate your Perkins Loan. Does the company representative tell you this as well and advise you to proceed with caution?
- Interest Rates – Different companies will charge different rates for subsidized government loans, unsubsidized government loans, and private loans. However, the interest rate a company will be charging should not be a mystery. You should never submit an application to learn the interest rate you will be charged. The company should be more than willing to provide this information to you free of charge. If the rate is too high, tell the company. You may be able to get a slightly better rate if your credit has improved. Some companies may even be willing to negotiate on private loan interest rates.
- Repayment Plans – When you consolidate, you will have a new repayment plan that extends the life of your loan. Speak with the company about the repayment plans that are offered. Are there minimum loan balances you must meet in order to have your loan extended? Do your federal loans qualify for income-based repayment plans? Ask why they are recommending one specific plan over another. Make sure that there isn’t a better plan that reduces the amount of interest you must pay.
- Too Good to Be True – Companies may brag that they don’t require credit checks and don’t charge any fees to process applications. Yes, many companies will not charge application fees. However, they probably charge other types of fees. Ask for a list of fees involved in consolidating these loans. If they don’t require a credit check, ask them how they will know if you qualify for the federal income-based repayment plan. If something sounds too good to be true, it usually is.
- Reputation – Student loan consolidation companies are just like any other financial institution. They have a reputation in the financial community. It is your job to research that reputation. Customer testimonials can help give you some insight, but that is only a small part of a company’s reputation. Read articles or reports that detail the company’s lending practices. Have they been penalized for failing to follow certain rules? Have they been hailed as one of the best companies in the business? Learn about their financial health. Are they financially stable, or is another company looking to buy them out or take them over?