What to Know About Paying Debt with Installment Loans
Amassing a considerable credit card debt doesn’t happen overnight. However, there are cases where a costly expense, like emergency renovations or urgent medical treatments, can force your credit limit to the edge. This puts you in a dangerous predicament of having a pretty high tab to cover for your card’s next due date. One way to gradually eliminate credit card debt is by consolidating it with a personal installment loan.
Installment loans are a variation of personal loans that borrowers are expected to pay through fixed increments. This makes it a decent method to pay off credit card debt by ensuring that you reach the minimum amount required paid per month. Like any loan agreement, one must clearly understand how it works and how it compares to other financial options.
Where can I get installment loans?
You can secure installment loans beyond traditional banks or credit unions through online lenders. Depending on the kind of lender you engage with, you may need to prepare several documents proving your credibility as a borrower. The common requirements you’ll need are proof of income, current debt and credit history, and other official paperwork. These will define your eligibility to secure a loan or what perks you can receive, like lower interest rates.
Keep in mind that installment loans will depend on your credit score, income, and debt, which will define whether you’ll get favorable rates. You should also remember that loan payments are typically higher than the minimum of your monthly credit card payments. This sets a shorter repayment period but could force you to manage a tighter monthly budget for your other expenses. If you’re struggling to pay for minimum credit card payments, it’s not advisable to take a loan with higher fees. However, the long-term implications of maintaining a huge debt will have more costly consequences.
What advantages do I get by consolidating my credit card debt?
While you may have a considerable credit card debt to pay off, the minimum monthly credit card payments are generally affordable. However, the longer the balance remains in place, the more interest it accrues. This leads to a much longer repayment process, which also marks you with a lower credit score.
Most individuals take out a personal loan for their credit card since the payment term is generally shorter. This is because personal loans’ dues end between one or five years, with higher monthly payments. Consolidating your debt will be more beneficial since you’ll only have one target date and set amount to consider per month. Additionally, installment loans are advantageous for borrowers since it usually has fixed rates that are lower than most credit card rates.
Can I do the reverse and pay for a loan with a credit card?
If you want to do the reverse, it’s only applicable to certain loans with restrictions. There may be clauses and policies restricting the acceptable means of paying off your debt, depending on your lender. For example, since federal student loans are backed by the Department of Treasury, using credit cards is an ineligible form of payment. It’s best to clarify these repayment options with your lender before you secure a contract with them.
Besides utilizing installment plan loans, you can also use a debt snowball or debt avalanche approach to optimize your repayment practices. Whichever repayment plan you choose, it’s best to seek a lender that can give you the most versatility and benefit with your loan option.
At Mid-Town Finance Company, we value the time-sensitive nature of repaying your debts. This is why we provide clear and straightforward installment loans to rebuild credit, consolidate bills, and other financial dilemmas. Apply with us today by calling us at 256-445-9069.