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Question: Can I consolidate my student loan debt with personal debt such as credit cards and car loans?
Since you have student loans, you’re probably already aware of the benefits of refinancing. You could lower your interest rate, switch lenders, and enjoy a simpler repayment.
Student loan refinancing also allows you to consolidate your debt — but only your student loan debt. On the other hand, there is a way to consolidate many different types of debt. Just like student loan refinancing, it requires creating a new loan in your debt’s place.
Pros of debt consolidation with a personal loan
You can use a personal loan. Apply the amount you borrow to student loans, credit cards, auto repayments, or other debt. Then you’d have the simplest possible repayment — just one loan with one creditor, instead of a handful of them.
You would shop for a personal loan the same way you’d compare other financial products, seeking the best terms from reputable lenders. A strong credit score and a stable income, either from you or a cosigner, can help you qualify for advertised rates.
But just because you can consolidate all your debt via a personal loan doesn’t mean you necessarily should. It could make for a significantly more expensive repayment. After all, student loan APRs usually beat those of personal loans.
Cons of debt consolidation with a personal loan
Say, for example, you have federal student loans with an average interest rate of about 6 percent and credit card debt with a summed interest rate of closer to 20 percent. Unless you qualify for a personal loan with a rate below 6 percent — perhaps with the help of a cosigner — you will end up paying more in student loan interest, even if you pay less on your plastic.
For the most potential savings, you’ll want to lower the rate of each of your debt types. In an ideal world, you would decrease your student loan debt cost by refinancing to a sub-6 percent rate. Then you’d shrink your credit card rates well below 20 percent, using a personal loan or a balance-transfer card with a zero-percent introductory rate (and no annual fee).
If you’re aiming to consolidate for the sake of simplicity but don’t have at least average credit, consider seeking debt relief assistance instead.
Keep your credit score in mind
If you elect to handle each of your loans separately and on your own, keep in mind the potential effects on your credit report. It’s best to apply for one loan at a time and to make those applications within 30 days of each other to minimize the effect on your credit score .
Alternatively, your score could increase if you first consolidate your credit card debt before applying to refinance your student loans. That’s because a lower monthly payment to your credit card issuer could improve your cash flow and lower your debt-to-income ratio  in the eyes of your potential student loan lender.
Dealing with more than one kind of debt is difficult. But before rushing to consolidate all your debt, ensure it will make your repayment easier — and more cost-effective. Otherwise, consolidation could be a step in the wrong direction.
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