Government Help On Debt: Government Loan Consolidation
For a country that is a
nation of debts, the federal government thankfully has programs
that help people pay off their myriad of loans. These loans are
invariably known as government loan consolidation programs and they
operate in the way that private loan consolidations do.
Government loan consolidations allow the average
debtor to round up all their existing debts and lump them into a
single loan. Borrowers of government consolidation loans benefit
from their lower interest rates, as against having to pay unsecured
loans with higher interest rates.
Apart from higher interest rates, government consolidation
also benefit from turning all their loans into a single manageable
account; this means they only have to think about making one monthly
payment instead of several monthly payments. This makes budgeting
easier, if not a breeze.
Students, in particular, benefit from the different
government loan consolidation programs available. With lower interest
rates, they are able to quickly wipe out high-interest loans like
credit card debts, student loans, as well as medical bills.
Under a Direct Consolidation Loan Program, for
example, the United States Education Department pays off the outstanding
amounts on a student debtor's federal education loans. After that,
he is granted a new loan, which represents the total amount of the
The Federal Family Education Loan program is another
government loan consolidation program. With this program, the government
extends a consolidation loan to pay off a debtor's existing loans.
There are four types of government consolidation
plans. There is the standard consolidation plan, the extended payment
consolidation plan, the graduated payment consolidation plan and
the income contingent repayment plan. Each of the plans is suited
to suit the individual needs of debtors.
The different types of plans refer to the payment terms on a government
consolidation. Their payment terms can vary from ten to thirty years.
The longer the payment term, the lower the monthly payment amount.
Keep in mind, however, if you choose the longer payment period,
the greater the amount you actually pay.
Government consolidation programs make it easier
people to their debts. For students who took out a student loan
consolidation, he or she can easily pay his debts in affordable
monthly installments upon graduation and if he or she is already
earning and has the capacity to pay. This saves students from the
hassles of paying different creditors at varying times in a month,
and at different interest rates at that. There is also no minimum
total amount on the loans to be consolidated.
There are other advantages that tip the balance
in favor of government consolidation. This loan does not require
a hefty processing fee. Payments too can be made in flexible terms.
The interest rate for a government consolidation is the weighted
average of the interest rate of your loans, which is rounded off
to the nearest 1/8 percent. It does not matter if a student has
a bad credit history - her or she would still be eligible for a
government loan consolidation.