Is it wise to pay off your credit card debt with an installment loan?

Is it wise to pay off your credit card debt with an installment loan?

The most common question asked by the debtors in the US is whether or not it is wise to pay off their multiple credit card debts with the help of an installment loan. Most people who are overburdened with a huge amount of debt are looking for ways to eliminate this burden. But it is not an easy decision to let go of all your debts. You have to calculate your debt amount with a debt calculator and then decide which way to choose to <a href="http://www.debtconsolidationcare.com/">pay off debt</a>. An installment loan will help you repay your debts in easy and affordable monthly installments that will be fixed through out the term of the loan. The debt consolidation loan will carry a lower APR and you can repay your debts with ease.

If this same question is being asked to a financial expert he will tell you that you can save money by repaying your financial obligations through an installment loan but the first consideration must be how long it will take to repay the total debt that you owe your creditors. You must determine the total time that you may take to repay the loan with the current interest rate and at the monthly payment plan that you?ve accepted with your loan lending company. You must have decided on a particular payment amount each month. You require calculating the total loan amount and divide it by your monthly payments to derive the exact time to become debt free. Have a look at some pros and cons of an installment loan.

The pros of paying off debt through an installment loan:

    * Bundling your high interest debt into a single loan: You will easily be able to bundle all your high interest debt into the single installment loan that you take out from the company. By combining your payments, you can easily stick to a single monthly payment instead of making multiple payments.

    * You can avoid all fees: By rolling over your debts into the single loan, you can let go of all your late fees and penalties that you may have accrued due to your spending habits.

    * You can boost your credit: By becoming current on your monthly debt payments through an installment loan, you will be able to boost your credit score. Just make sure that the company reports all this information to the credit bureaus so that your credit score leaps accordingly.

 

The cons of paying off debt through an installment loan:

    * The interest rates may not suit your needs: For some people the debt consolidation option may not be suitable according to their financial needs. Apart from the difficulty in finding the best and the most competitive interest rates, it can also happen that consolidating your debt wouldn?t make much sense. Therefore, you need to make sure that the installment loan carries an interest rate that really helps you save money.

    * It may take more time to pay off debt: As the length of the debt accounts are extended, you may end up paying back a larger amount than you actually owed. Though apparently it may seem that your monthly payments will be lowered, but the truth is that you will be accruing huge interest rates.

 
 

Therefore, before deciding to repay your loan with an installment loan, make sure you take into account the above mentioned considerations. It is always wise to pay off your debts through an installment loan only when you calculate that you will actually save money with such a loan. This can be easily determined with the help of a debt calculator. You just feed in the interest rates and the monthly payments to check how much time you may need to become totally debt free.

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