When you have a large expense that you cannot pay for with the cash you have on hand, you might instead consider placing it on your credit card. This is a feasible solution when you have a high credit card limit, but it is also not something that you should do with your finances. Credit cards can have an APR that is too high to be a good financial decision. An installment loan might be a better option.
Installment Loans are Common
There are many types of loans that are considered installment loans. This includes car loans, house loans, and student loans. Rather than saving up money to pay off the loan all at once, an installment loan has the debtor make regular payments, usually once a month, until the debt has been paid off. This is in contrast to a credit card payment, where there may be a minimum payment due, but the debtor also can add to the debt and can pay off the credit card however he or she sees fit.
Credit Cards are Too Easy
Credit cards are often used because they are very easy. Rather than having to apply for each individual installment loan, a credit card is always available and can be used when needed. However, those who own credit cards tend to spend a lot more money than they do when they use cash. This can lead to them ending up in debt more quickly. The interest on a credit card compounds and the debt can grow very quickly if it is not managed properly.
Credit cards reduce your future income. Whenever you borrow against a credit card, you are borrowing against something that you haven't earned. When you obtain an installment loan, it is usually for a specific purpose and you will usually not be adding to the installment loan.
Credit Card Terms are Confusing
When you do use credit cards, it's important to understand the terms. In many cases, the terms are confusing and cardholders end up spending more money than necessary. Credit cards can cost hundreds of dollars extra a year in the form of fees in addition to the interest.
You Might Experience Credit Card Fraud
Unlike with credit cards, you don't have to worry about title loan fraud. With credit cards, you have to worry about your credit card data being stolen through a hack or a card skimmer. For these reasons, an installment loan is often better than a credit card.
Contact an installment loan service for more help.