What is the difference between consolidating and refinancing

The interest rate you pay, as a whole, will not change – you’ll end up with a weighted rate on the resulting loan that is effectively the same rate you were paying on those loans separately.That single rate will apply to of the debt you consolidate, which may or may not matter (if you somehow had one loan with a high rate relative to other loans, it might be better to pay that off aggressively instead of adding it to your consolidation loan).However, there are other types of loans that can handle different types of debt. That means you could use a personal loan to refinance your student debt, a credit card or two, and your auto loan.Of course, this only makes sense if you’re truly going to save money (and avoid racking up debt again once you free up those lines of credit). But moving from federal loans to private loans is not something you can reverse – you’ll lose the benefits of those federal loans forever.

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A private loan consolidation is only an option if you refinance your debt.When refinancing a loan, the person changes the terms of the loan.Many people choose to refinance in order to lock in lower interest rates and may choose a shorter term or smaller payments.When you refinance, you’ll either end up with a fixed or variable rate loan.Make sure to understand how the rate works, and what will happen if interest rates change – will your monthly payments go up someday?

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