Navigating your student debts is challenging, especially if you have many of them. It’s more likely you’ve taken multiple debts from different lenders during your college life. But remember, you will soon start paying them immediately after you graduate.
If you have federal student loans, all the transactions will happen via a federal loan servicing firm. These transactions entail maintaining the address of making the payments and getting a loan to consolidate the debts. A student loan servicer can be a great helper if you’re looking for relief from your debts. They can help you defer the loans for some time.
If you have a federal student loan, a loan servicer will help handle the specifics of the loan. But, if your debt is an NBFC loan, you are not entitled to some plans. You will work directly with your lender during loan repayment. But what is a loan servicer? What is their role in managing student debts? This guide shows you the role of a loan servicer. So keep reading.
Who is a Loan Servicer?
It is a third-party firm that comes in aiding loan management on behalf of a lender. It is so challenging to manage student loans. The process is a complex one, and it’s hectic to keep track of the details of the loan. Loan servicers can relieve you of all the stress because their main role is managing the loans. Basically, a loan service collects the payments, manages the details of the loan, and handles all the customer service tasks.
What is the Role of a Loan Servicer?
Loan servicers play an important role in managing student debts. They not only efficiently manage the details of the loans but also help students to avoid loan defaulting. Their main role is to make sure that borrowers pay back the loan balance in full according to loan terms and agreements. Loan servicers are entirely involved in the loan repayment process, from when the loan is taken till the last payment.
During the repayment process, they often provide monthly statements and also keep payment records that are made towards the loan. In case of changes, they are likely to switch to an affordable repayment plan. Though private student loans availed through the NBFC personal loan app can also be serviced by some companies, it is unlikely.
Here’s how a loan servicer helps in managing student debt;
1. Loan servicers will collect and track your payments
As said, loan servicers come in handy when managing debts. Often, the servicer acts on behalf of federal and private lenders. Therefore, even if you have a federal loan, you will work with the servicers to repay it. What a servicer does is contact you immediately you get the federal loan.
You need to know how much is given to you and the interest accrued while in school. When you graduate, you are allowed some time, basically six months or a year, before you are given the bill. The loan servicer will usually reach out to you concerning the debt and how you plan to pay it off.
2. A servicer switches the repayment plans
Often, a loan servicer places a borrower on a 10-year student loan repayment plan. This plan breaks up the balance into fixed payments of about 120 payments, which may be challenging to pay if you’ve got more debt. A loan servicer may assist you in coming up with a new plan if you are eligible. They can get you an income driven repayment plan which may cap your debts at a certain percentage of your income. But remember, you are not entitled to federal repayment plans if you funded your education fees with an NBFC personal loan.
3. Customizing your repayments
Immediately you start receiving your income and set aside some to handle the debts, you may want to start with those loans with higher rates. It helps as you will save some money. Similarly, paying more than the agreed payment lowers both the balance and interest you have to pay over the specified period. Therefore, it pays to kick in more than what you are supposed to pay.
But, to achieve this, you need the help of a loan servicer who can customize the payments and advise you on how to go about it. Working closely with the servicer will help avoid extra payments that may apply towards your next month’s debt.
4. A loan servicer processes deferment or forbearance on your loan
During the repayment, there may come a time when you cannot afford to pay the monthly amount due. You can call your loan servicers and notify them sooner. If you can’t pay the debts due to financial difficulties, you can apply for loan forbearance or deferment. It will temporarily postpone the payments for some time. If you have a federal loan, you may be eligible for loan forbearance.
5. Loan servicers help in mitigating risks
Loans are very risky if the borrower is doubtful. However, loan servicers may help in risk mitigation by making sure the borrower only repays the loan as per the agreement. Basically, they will help monitor the payment history of the borrower and also take the necessary actions in case the borrower defaults on payment.
6. Loan servicers devise a repayment plan that suit both parties
Borrowers defaulting on loan repayments happens often. But, loan servicers can easily turn the situations around as they have the expertise to manage the loan collection process. They’ll work closely with borrowers to devise a new repayment plan that may work for both the lender and borrower.
To Sum Up
Managing loans isn’t easy. It needs a lot of expertise in the lending industry and always be updated with the latest regulations and trends. Loan servicers understand this field well and are always on their toes to learn the new trends that come up. They will thus help you in managing your student debts efficiently.
In case you want a quick loan to consolidate your student debts, getting an instant personal loan online is the way to go.
