Top 10 Consolidation Loan Gotchas

When you research for consolidation loans, there are things to watch out for, and often you have to read the fine print to find them. We want you to be informed, so we’ve done some research for you. Below are some methods used by consolidators to get you to sign up for a loan:

• "Apply by this deadline!"
  Well, the fact is THERE AREN’T APPLICATION DEADLINES in student loan consolidation. Just keep in mind that interest rates may change every July 1st, so it’s a good idea to check in June if rates are going to change that year and determine if you should apply before the loan interest rates change.
  
  
• "Pay on time and keep your benefits."
  Make sure to check when your education loan lender considers a payment late. Many lenders define an on-time payment as a payment received no later than 15 days after the schedule payment due date. There are some lenders that consider a payment late after 14 days from the scheduled payment due date. So if you thought you had up to the 15 days (which is offered by most lenders), then your late payment could result in a loss of your consolidation loan benefits.
  
  
• "Apply online and get great interest rate benefits!"
  Some loan consolidators may require you to apply for a loan online in order to receive the benefits. Plus, if they send you an application confirmation via email, and if your email address is deemed undeliverable twice in 48 hours, then you may not get the loan benefits.
  
  
• "Get an 0.25% interest rate reduction by doing business electronically."
  That’s great but you might LOSE that 0.25% benefit if you simply change your email address and they get a bounce back when they try to send your notice or statement. Be sure you understand your obligation to the consolidator in order to keep your benefits.
  
  
• "Avoid late fees...pay with auto-debit."
  With auto-debit, watch your bank account balance! When the lender tries to auto debit your bank account and there are insufficient funds you may get a late fee from both the consolidator and your bank. Be sure to read the fine print to get specific details on their auto-debit program.
  
  
• "No fees to apply for our consolidation loan!"
  Not charging fees is a requirement with Federal loans. No one charges a fee for a consolidation loan.
  
  
• "Important information about YOUR student loan interest rates!"
  Some loan consolidators attempt to mislead you into thinking that you’re being contacted by the lender of your education loans and that there are changes to your loans. Their hope is that you will contact them so that they can offer you their loan instead. Check out the lenders before applying for a loan.
  
  
• Mailings that use seals or logos to imitate the government, a college or university.
  Some loan consolidators do this to entice you to open their mailings. Be sure to really check out their logo and fine print to ensure you know who you are dealing with before applying for a loan.
  
  
• "Receive a reduced interest rate benefit if you consolidate during your grace period."
  Anyone applying for a Federal consolidation loan during the grace period (before entering repayment) will receive a reduced interest rate. It is a Federal guideline for your Stafford loan interest rates to be 0.6% lower when you are in school, in grace or in deferment.
  
  
• "Get Deferment or Forbearance Insurance."
  Be on the lookout when some loan consolidators may play-up their services. If a loan consolidator offers you Deferment or Forbearance Insurance, they are basically "offering" you deferment or forbearance, which is a standard feature of consolidation loans and is offered by all lenders. Be sure to compare apples-to-apples and understand the actual benefits that your may receive with a loan product.

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