Prepare for your studies, the most common and convenient way to get a loan is student loan. However, upon your graduate, its time to start paying it off and you must always be prepared for it. As a student, one of the best options is getting a Direct Consolidation Loan. This option not only benefits students but also available to working adults. The following paragraphs will review the different types of payment plans and benefits for Direct Consolidation Loan.
Simplification is the obvious advantage for consolidation loans for those people who have several different student loans. Convenience is the key pointer to people with many different student loans. By uniting them under a single Direct Consolidation Loan, repaying the loan becomes more easily manageable, because you only have to make one payment instead of several different ones. You will have four different types of payment plans to choose, two of which will take into account your income.
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You dont require to have graduated to take advantage of Direct Consolidation Loan. Under such loan, it is common to have granted a lower interest rate than those people who refinance after they have graduated. Maybe up to 0.6% lower.
Standard Repayment Plan
Borrowers who choose the Standard Repayment Plan must adhere to the requirement - at least pay a minimum of $50 per month. The maximum lifespan is ten years. Those people with higher income may choose the Standard Repayment Plan because borrowers pay the least interest compared to all the four plans with only ten years term. Lets take an example if a borrower loan $15,000 for his studies with 8.25% interest rate for ten years. The repayment is $184 for 120 months, that is equal to a total of $22,077. That means $7,077 of interest he has to pay for the whole term, and is considered the lowest interest as compared to all the other plans with longer term.
Extended Repayment Plan
The Extended Repayment Plan is slightly flexible than the Standard Plan. With the same minimum payment of at least $50 per month, the repayment can be extended between 12 to 30 years. The period varies according to the total amount of the debt. This plan benefits borrowers for larger amount of debts with lower fixed payment and up to 30 years of repayment term. Lets take the same example of $15,000 loan with 8.25% interest rate over 15 years of $146 monthly payment. That will be equal to $26,196. Sure, under the Extended Repayment Plan the interest borrowers have to pay will be higher than the Standard Plan.
Graduate Repayment Plan
The Graduate Repayment Plan, with a similar lifetime as that of the Extended Repayment Plan, the payments are low during the first period and they increase over time, usually every two years. This plan fits in between Standard and Extended Repayment Plan with lower payments initially and will adjust higher every two years to allow borrowers sufficient time to build their income steadily.
Income Contingent Repayment Plan
The calculation under the Income Contingent Repayment Plan includes borrowers annual income and family size. Monthly payments are adjusted annually with a maximum lifetime of twenty five years. This plan provides the flexibility to make payments according to borrowers annual income and thus enable them to avoid any financial hardship.
Its up to the borrowers decision to choose the type of plans, I hope the above explanation will provide a better understanding on direct debt consolidation loan.
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