Government debt consolidation loans are for individuals who owe money to many organizations. It is given by the government in order to assist the individual pay back the debts. Instead of getting backlogged by multiple debt payments, these debt consolidated loans consist of only one payment per month. These loans are all fixated on one interest rate; it is usually the case that it is lower than the interest rates one the several debts that you have accrued. The difference here is government debt consolidation loans are secure while the others are not which is why it has the potential to be more affordable.
Government Debt Consolidation Loans and College Students
When a student graduates from college, student loans are likely to follow. In this case, government debt consolidation loans are a good option, especially if this student has not yet begun to work his credit score up. Instead of paying loans off to different loan venders, these government consolidations will help the student (with a secure and fixed interest rate) increase his/her credit score, while also being able to effectively and efficiently pay off much burdened student loans.
How does it Work?
In a nutshell, if qualified for this type of loan, a government entity or consolidation company pays off all of an individual’s debt. They then add up all the numbers, set a fixed interest rate and a minimum monthly payment. The individual is required to pay back all of the money, of course, and this is done by way of a contract set by the company. Another bonus to government debt consolidation loans is the fact that these monthly payments are often lower than what you were paying in the first place. Individuals also have the freedom to extend the time frame in which you are obligated to make payments. This one monthly payment lessens the feeling of complexity in one’s life and offers reassurance that they are repaying their debt on time and in full.
Types of Payback Plans
- Standard Payback- This is self-stated in the plan name. This is the standard monthly payment (which is fixed) and stays the same until you pay off the entire loan.
- Extended Payback- This plan is useful for individuals who have to have more time paying back their loans. In this type, you add more time to paying back the loan which, in turn, decreases monthly payments.
- Graduated Payback- This plan is began with low payments at first, then, after a certain amount of time, raised to a higher payment per month. This is an effective way to pay off debt more quickly than the previous two plans.
- Income Dependent Payback– This type of plan is, of course, associated with one’s income. The payments are in correlation with how much money the borrower makes in a year.
Qualification for Government Debt Consolidation Loans
Government debt consolidation loans are all contingent upon the actual loan company in question. For example, if you are good with current payments and/or have not defaulted, you may be able to qualify. Since credit is definitely a factor for consideration, a credit check may be required. This, however, depends on your location and the loan company. Also, if requesting a government debt consolidation loan for mainly student debts, it is possible that you may not even need to be holding a job. Commonly, it is seen that government backed loans are more eligible for these consolidation options rather than non-government backed loans. As stated earlier, these loan types are frequently granted to recent college graduates due to the inability to keep up with all of their recently accrued debt. It is common for these graduates to perhaps not even be holding a job. Another commonality is the fact that for recent graduates, credit may not be as much of a factor as for others because of lack of chance to build up credit.
Though credit is not a complete deciding factor of qualification, it helps to keep a healthy payment history because if you are always late on payments, it hurts your ability to look qualified for a government debt consolidation loan, especially if you are late on government backed loans. Finally, it is important to time your application of debt consolidation accordingly. For instance, you cannot receive these types of loans when you are enrolled in school. In other words, you have to be a graduate in order to qualify.
Qualification for debt consolidation leans upon payment history, type of debts, and timing of applications. If you feel as though you have satisfied the above qualifications and you believe a government debt consolidation loan is the right idea for you, you could be well on your way to paying back all of your debts and moving toward living a more stress free life in this already stressful world.