Government Debt Consolidation Loans

Government debt consolidation loans are offered by the government in order to allow an individual repay the amount which he/she owes to several institutions. Through the consolidation of these loans, a debtor makes a single payment rather than making multiple payments. These kinds of loans are more convenient to pay off and often come with lower rate of interest. The rate of interest is lower as government loans have been regarded "secure" debt while other institutional loans are regarded as "non-secure". When an individual asks for a government debt consolidation loan, the consolidation company or the government agency clears off the debt in its entirety. A new loan is issued by the consolidator of the equal amount consisting of a secured interest rate.

Advantages of a government consolidation loan

- The convenience of this kind of loan is unmistakable. The borrower makes payment to a single institution instead of a number of vendors. The loan can be paid same time each month without having to worry with regard to various rules and arrangements.

- The monthly payments are frequently lower. Many a times, the duration of the loan may be increased to reduce monthly payments as well as make repayments easier.

Types of government consolidation loans

There are various programs devised by the federal government for helping students especially, for consolidating their loans for quickly reducing and eliminating the debt. Students generally carry the burden of credit card debt, student loans as well as medical bills. The Department of Education makes the payment for the earlier federal education loans. A fresh loan of the consolidated amount for the earlier loans is issued. This belongs to the program of direct consolidation loan.

The Federal Family Education Loan (FFEL) Programs as well as the Direct Loan Program belong to the Higher Education Act and allow for loan consolidation. Paying off the multiple loans with the help of a single loan allows individuals to make timely payments and also at a reduced rate of interest. There is a greater clarity in terms of payback, the interest charged as well as the due date.

The government debt consolidation program consists of four plans designed for the debtors. These are:

- Standard Plan

- Extended payment plan

- Graduated payment plan

- Income Contingent Repayment (ICR) plan

The standard payback plan involves a general payment amount, usually monthly, which is steady over the entire loan duration. The second plan which is the extended payment plan generally increases the loan tenure thus reducing the amount of payment every month. The graduated payment plan initially brings in reduced amount of payment per month which gradually increases within a specific time period. The income contingent plan considers the debtor's income when fixing the monthly amount for payment.

Here is a final word of caution against those companies which provide assurance with regard to providing ""free government's grant money". One should abstain from blindly trusting these companies. The grants are for organizations which look for extreme innovations and are not designed for providing assistance to civilians waging off their bills related to credit card.