what is reconsolidation

Date: Wed, 11/16/2005 - 16:22

Submitted by 4u.bryan
on Wed, 11/16/2005 - 16:22

Posts: 819 Credits: [Donate]

Total Replies: 5

what is reconsolidation

The term "Reconsolidation" is self-explanatory enough. It means consolidating a Federal Consolidation Loan. If you had a consolidation loan earlier and now want to consolidate this for some reasons, you can definitely do it.

People wish to reconsolidate for several reasons, like-

The interest rate of consolidation loan is lesser than previous,
Some student loans are out of the consolidation program done previously.,
Your spouse has some loans that you wish to consolidate.

But the lenders usually set some specific guideline for Reconsolidation loan approval and it varies for users.

However the basic criteria are same on an average. These are-

1) Applicant should have at least one loan not included in the previous consolidation loan.

2) Spouse of the applicant has some federal loans that he/she wishes to include in the reconsolidation loan.

3) The applicant has a consolidation loan with some other lender.

Some lenders often add their preferences of loan type while reconsolidating. The complete detail is available with lenders. The norms might depend on the current state of your account also.

clarification

There are ways to reconsolidate, even if you or your spouse have no other loans to include in the new consolidation.

The interest rate will still be calculated by taking a weighted average of the current rates on the loans to be included; rounded up to the nearest 1/8th point. If you happen to be one of the borrowers who consolidated with the DOE a few years ago and qualified for the .8% discount for making your first 12 months of payments on-time - this would actually raise your rate slightly, so be careful.

This reconsolidation would make sense for the following situations -

1. You have a variable rate consolidation, reconsolidating it now would lock it in at a good rate.

2. Better Borrower Benefits (interest rate discounts) with the new lender, or you have been disqualified for borrower benefits because of late payments with your current lender.

3. You have a fixed rate consolidation loan, and additional variable rate loans - by reconsolidating, you would lock all of them in at their weighted average.

4. Lower payments - by reconsolidating, your repayment term would start over (lengthen)

5. Refresh Deferrment benefits - some servicers do not track the history of deferment usage; by reconsolidating they treat it as a new loan, which means you get a new 3 years.

Hope this helps

Lance