What is consolidation?
Loan consolidation is a new loan that is created by combining the repayment of two or more loans to reduce the amount of monthly payments and extend the loan repayment term.
Should you consolidate?
You may already be receiving advertisements from banks, lending institutions, and consolidators urging you to consolidate your loans with them. These ads usually say you get lower interest rates and/or smaller monthly payments if you sell your loans to them.
An important consideration in the decision to consolidate should be the total cost of the loan. This can be higher with consolidation because the repayment period can be much longer than the standard period. Further benefits associated with loans are lost when those loans are consolidated.