Consolidation

[Anonymous]

I've read through a few posts but a lot are old and some of the bank suggestions are no longer offering consolidation options.

This is for my fiance. He has private school loans through Sallie Mae. Maybe about  $25000. Private loans.

He would like to consolidate to a different lender, if for nothing else but to not deal with Sallie Mae anymore. He's like a better interest rate. He's at 9%,

Any options? So far I've found Wells Fargo and SoFi.

Also, when applying for a loan consolidation, does your credit score take a huge hit?

His credit score, according to credit Karma (which I'm aware is not as accurate) is 725.  Mine is 760. We are going to try and get a mortgage and I'd hope his wouldn't drop too much. While I believe I could get a mortgage by myself w/my score, credit history of perfect payments, and income, I'd like to get it together.

[SCF]

The pool of lenders offering private loan consolidations has stayed relatively small - you've named two of the big ones (WF and SoFi) and eliminated a third (Sallie Mae).    Other than just searching online, you may want to investigate any smaller banks or local credit unions that you have a relationship with, or which you could join.

A consolidation loan will probably drop his score a few points, just like any other installment loan.  There will be an inquiry, and the new account ding, plus a drop in his average age of accounts, but all of those things fade over time.  In terms of getting a mortage, I would be more concerned about your debt-to-income ratio and what impact the consolidation might have on that, if any.

[helaurin]

I recently refinanced with Sofi.   My score dipped a handful of points - no biggie for me.

[Anonymous]

I have looked through the boards and have not seen anything that address this specifically, but it may be here somewhere, and if so, I apologize.  About a year ago I nearly defaulted on my student loans.  I didn't mean to, but I didn't actually know they were due... long story.  Anyway, the point is that I have a lot of loans of different sizes and they all posted negative remarks on my credit reports, incuding two from the university itself that went to a collection agency, and I have tried tirelessly to get in touch with that agency, and they won't return my calls...  So I have a couple of questions:

First-- why would a collection agency not want to collect?  I have my theories, but I'm new to the game.  I was thinking that perhaps if they avoided talking to me, they would write off the bad debt faster with the school, and that might explain why they don't seem interested in actually collecting.

Second-- and more importantly-- I want to repair my credit.  It's completely ridiculous that I have the low scores I have, when I earn as much as I do.  I could easily just pay off all the loans in a few months if that would help, but I've been told that it won't actually help.  I'm wondering, though, if I were to consolidate my federal loans, which is most of them, would it effectively erase my payment history on my old individual loans?  Or would those late payments still show?  Any advice would be appreciated.  Thanks so much.

[SCF]

Consolidation will bring the loans out of default, but it doesn't offer any of the credit improvements that rehabilitation offers.  Are you contacting the CA at the info listed on your credit report?  Have you tried looking them up on the NSLDS to get an alternate number/address?

Also remember that only federal loans can be rehabilitated, or have their default status removed through a federal consolidation.  Private loans are like any other installment debt, and you have to work with the CA on a settlement or payment plan.

[Anonymous]

So, I guess there actually is no collection agency.  I was told that there was, but apparently, there isn't and never has been.  The school just said I failed to pay, so there's a FP on my credit report.  But the thing is, I am willing to pay it... I called the school last week, once I read the response to call and find out who actually owns this loan, and they didn't call back or respond to my emails.  So I don't know what to do... could they actually just not want me to pay it would be more paperwork for them?

And to clarify,  my federal loans are not and have never been in default, but what I'm wanting to know is if I consolidate them, will the old remarks about past due payments basically be erased because the accounts would show as paid satisfactorily, and then the new accounts would show payment history from that day forward?  Thanks!

[SCF]

Did you have Perkins loans through your university?  Or were the loans some other type?  Perkins loans are also eligible for rehab, but if your school had some type of loan program they managed privately, the federal rules would not apply.

Consolidation will not remove any of the late marks from your report.  The loan should report that it has been paid/transferred/re-financed, but the accounts will continue to be on your report for ~10 years, and the individual late marks will remain for 7 to 7.5 years.

[Anonymous]

I do have a Perkins loan, but the two loans I'm talking about specfically are from the school itself, a non-regulated loan program, and yes, I realize the rules don't apply to those.  But it's completely maddening because I just literally want to pay them, and I can't. And I'm wondering why.  I have called the school over and over and over, emailed different parties, offering to pay them.  No one will return my calls, emails, nothing-- when the school contacted me to let me know I had defaulted, they told me that they could no longer accept payment, that it was being handled by an agency, and they gave me that number.  The agency they referred me to has never heard of me, and has never posted anything to my credit report.  The school, however, posts a FP and past due on both loans every month, and has for nearly two years.  It seems very unfair and perhaps even illegal that they continue to post past due when I am more than willing to pay.  This has all been very frustrating because I have never been late for anything, ever-- and money isn't, and has never been, the issue.  

But also, back to my question regardig my federal loans-- should I consider, then, defaulting on purpose?   Like I said, I did not default on my federal loans.  They are all current, but show previously past due.  If, however, I was a clean credit report, I could conceivably default, then rehab and pay the new loans and my report will be totally repaired?

[SCF]

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@Anonymous wrote:

But also, back to my question regardig my federal loans-- should I consider, then, defaulting on purpose?   Like I said, I did not default on my federal loans.  They are all current, but show previously past due.  If, however, I was a clean credit report, I could conceivably default, then rehab and pay the new loans and my report will be totally repaired?

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When you complete rehab, the only requirement is that all remarks related to the default will be removed.  That means that the status will be updated to "paid/transferred" or similar from "default/gov't claim filed/etc."  The letter of the law does not require lenders to remove the lates leading up to the default, and some lenders will not remove them.  Basically, if you choose to default, you are gambling that the lates will be removed, and if you lose, you wind up with even more serious derogatory remarks on your report and waste at least 6 months of time when you could be building good payment history.