Interest rate of student consolidation loan depends upon the weighted average of all the loans put into the program. Let's consider a simple example. Tim has two student loans of $1200 and $1800. The rates of interest are 2.82% and 3.42%.
- First calculate the per loan weight factor. Multiply loan amount with respective interest rate –
$1200 * 2.82% = 3384
$1800 * 3.42% = 6156
- Perform the same for all the loans you have, then add the per loan weight factors –
3384 + 6156 = 9540
- Now add all the loan amounts –
$1200 + $1800 = $3000
- Now divide total per loan weight factor by total loan amount calculated in the last step to get the weighted average –
9540 / $3000 = 3.18%
- Now round up this figure to nearest 1/8% -
3.18% to nearest 1/8% = 3.25%
So if Time consolidates all his student loans, the rate of interest will be 3.25%. This rate is capped at 8.25% also.
It sounds good. Some consolidators and financers offer extra facilities also. Get in touch with the counselors to collect more knowledge.
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