The Working of Government Debt Consolidation

The government debt consolidation program works especially for the students. It is very common for the students to accumulate loans and debts through credit cards, student loans, and medical bills. The government debt consolidation program combines the debt of the student, pays them off, and makes the student responsible to pay for just one loan. When debt accumulated due to different credit cards is paid off by one single loan then it is called credit card debt consolidation. Credit card debt consolidation is a part of unsecured debt consolidation.

Types of Government Debt Consolidation

The debt consolidation programs offered by the government are of four types

  1. Standard Repayment Plan: In this plan, the duration to pay off the loan is 10 years. The rates of interest and the monthly payment are fixed.
  2. Extended Repayment Plan: In this plan, the duration for paying off the loan can be extended to 30 years. The interest rate is fixed but the monthly payment in spite of being fixed is less and affordable. In this type of plan, the debtor ends up paying more interest.
  3. Income Repayment Plan also known as Income Contingent Repayment (ICR) plan: In this plan, the duration of paying off the loan can be extended to 25 years. The monthly payment is not fixed but is variable depending upon various factors such as income, amount to be paid, number of family members etc.

The Process Of Application:

The process of applying for government unsecured debt consolidation loan is simple. One can fill the form and submit online as well as offline. The online alternative is easy. The Government Debt Consolidation services works through different lenders that have their own websites. The Government Debt Consolidation program is cheaper than the debt consolidation services offered by the traditional lenders just because the rate of interest is much higher in case of traditional lenders. The debt consolidation services offered by various lenders should be compared. The chief financial office of the city, also called the finance director plays a key role in recommending the debt consolidation service. The process of consolidation of bonds involves recalling of the bonds and issuance of other bonds. This legal process is usually complicated and so requires the services of specialized attorney also known as bond attorney. Sometimes the process may prove to be expensive but always cheap in the longer run.

Different Lenders: The Government debt consolidation services are not offered directly but through different lenders such as the Federal Education Services (FES). Some of the lenders offer free debt consolidation and free debt counseling. The consolidated loan is issued by the Department of Education to payoff the other loans. This is included in debt consolidation program. Debt consolidation programs are allowed under the Direct Loan Program and Federal Family Education Loan (FFEL) Program that come under the umbrella of Higher Education Act (HEA).

Benefits of Government Debt Consolidation program: The biggest benefits of Government Debt Consolidation services are reduction in the monthly payments and decreased rate of interest.

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