Consolidating loans through direct loans

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Refinancing is credit-based, meaning your credit score is a primary factor in whether you qualify and the new interest rate you'll receive.The lender will also take your income and current debt-to-income ratio into account.

There are two methods for combining several student loans into one: federal consolidation and private consolidation, which is also known as refinancing.

Federal student loan consolidation is, as it sounds, available only for federal loans, or those the government makes.

You do not need to meet credit requirements to consolidate federal loans, and after consolidating you'll pay a single bill to your student loan servicer, the company that accepts payments on behalf of the government. Your new interest rate will be a weighted average of your previous loans' rates, rounded up to the next one-eighth of 1 percent.

If you're eligible for a lower rate than you currently pay, you could save a significant amount on interest, making it an especially appealing option for borrowers with high interest private loans.

Before taking the plunge to consolidate and refinance student loans with a private lender, consider the following: Your credit score matters: Those with high credit scores will get the lowest interest rates on a refinance loan.

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