Whether it is financing items with large tickets, covering unplanned emergency costs or offering a monetary buffer when cash flow is tight, you can use and build up debts in various ways. Revolving credit in the form of a credit card is most commonly used for sporadic, unplanned expenses, but because it is easy to obtain and even easier to use with most companies, revolving debt can quickly become a financial burden. If it becomes a challenge to keep up with revolving debt balances and monthly payments, consider using repayment credits through a personal Wilry-rich loan to pay off credit card debts. This strategy has both advantages and disadvantages.
The biggest advantage of using repayment credit to pay off ongoing debts is the adjustment of monthly repayment expectations. With credit cards and other ongoing debts, you are expected to pay a minimum amount on each outstanding balance. This can create countless required payments with a wide range of repayment amounts, making it difficult to budget from month to month. With installment credits you receive a fixed monthly repayment amount for a certain period, making budgeting for a longer period much easier. Installment loans can also be extended over time, allowing for lower monthly payments that better meet your cash flow needs each month.
Lower financing costs
For qualified borrowers, a repayment credit can be less expensive than revolving credit, since it concerns interest rates and user costs. Credit card companies charge interest rates ranging from 9% to 25%, which meet every month when balances are not fully paid. The higher the interest rate, the more expensive it is to bear ongoing debts in the long run. Conversely, installment lenders offer lower interest rates, ranging from 2% for secured loans to 18% for unsecured banknotes. The use of the lower interest charged for installment credit to pay off debts can save hundreds to thousands of dollars over the course of the repayment period. Ongoing debt may also be accompanied by excessive payments for late payments, credit limits or annual maintenance; installment credit is void of these costs.
Disadvantages of installment credit
Although you can enjoy some benefits from using installment credits to pay off more expensive, inconsistent revolving debts, there are some disadvantages. First, some lenders do not allow advance payment of the loan balance in the long term. This means that you cannot pay more than the required amount every month without receiving a prepayment penalty. This is usually not a problem with the repayment of credit card debts.
Installment credit financiers require stricter qualifications for income, other outstanding debts and credit history. Most credit card companies are more flexible in their lending, especially for borrowers with a higher risk.
The repayment credit may seem like a panacea for renovating debts with a high interest rate, but this strategy is only useful if you are committed not to add to credit cards once you have paid the balances. Adding new monthly payments for accrued credit to your credit card in addition to the monthly payments required by an installment loan can put incredible pressure on your budget every month.