Define: Co Terminal

A co-terminal agreement is a legal document that allows a borrower to consolidate multiple loans into a single loan with a single interest rate and payment schedule.

Typically, co-terminal agreements are used to consolidate student loans, but they can also be used to consolidate other types of loans, such as personal loans or credit card debt.

Under a co-terminal agreement, the borrower’s existing loans are paid off and replaced with a new loan that has a single interest rate and payment schedule. The borrower then makes monthly payments on the new loan until it is paid off.

The main benefit of a co-terminal agreement is that it simplifies the borrower’s debt repayment by consolidating multiple loans into a single loan with a single payment. This can also result in a lower interest rate and lower monthly payments.

One potential downside of a co-terminal agreement is that it may extend the borrower’s repayment period, resulting in more interest paid over the life of the loan. Additionally, if the borrower has a variable interest rate loan, consolidating it into a fixed interest rate loan may result in higher overall interest payments.

Most lenders require that borrowers have a minimum credit score and income to qualify for a co-terminal agreement. Additionally, borrowers must have at least one eligible loan to consolidate.

Once a co-terminal agreement is signed, it is legally binding and cannot be cancelled. However, some lenders may offer a grace period during which the borrower can cancel the agreement without penalty.

If a borrower misses a payment on a co-terminal agreement, they may be subject to late fees, and their credit score may be negatively impacted. Additionally, if the borrower continues to miss payments, the lender may take legal action to collect the debt.

Yes, a co-terminal agreement can be refinanced if the borrower qualifies for a new loan with better terms. However, refinancing may result in additional fees and interest charges.