What is the difference between consolidating and refinancing

Disclaimer: Modest Money is designed to provide entertainment and information to investors and those who would like to learn about the market, personal finance, loans and more.You should never use the information on Modest Money as investment advice.Before you run off to the nearest lender to consolidate your current student loans, there are some things you need to be aware of when looking at this option.While increasing the length of your loan period can significantly reduce the monthly payments, it will also spread out the principal balance and increase the amount of interest you pay over the life of the loan.

When making investment and other financial decisions, there is one piece of advice we can give you!This is done mostly for convenience, to simplify the process and only make one monthly payment.Consolidation Might Not Always Help As the Federal Student Aid website notes, borrowers should be cautious when consolidating their student loans.Two of the most common options include debt consolidation and refinancing.You might need to do one or both of those, so get familiar with what they do (and don’t do) for you.The goal is often to get a lower interest rate so that you can reduce your lifetime interest costs and your monthly payment.

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