How to Choose Between Installment Loans and Revolving Debt
No one likes to borrow money, but when an emergency arises there is often no other option. The decision to borrow is easy. The difficult choice is who to choose for a lender. Consumers have two basic debt options: they can choose a revolving debt or an installment debt plan. Here is why most do better when they select an installment loan.
Predictable Payment Amounts
Installment debts are loans with set rates and fees, and the borrower knows before they sign any contracts the amount their payments will be as well as how many payments it will take to repay the loan. Credit cards are an example of a revolving debt. The interest rate can change, and the amount that people must pay depends on the rate as well as the debt balance.
Larger Loan Amounts
It is possible to charge a lot of money to a credit card, but most companies limit the available balance for new cardholders. They also only allow borrowers to use a small amount of the balance for cash advances. Installment loans have lump-sum payouts, so the borrower has the cash they need as soon as they receive an approval.
Potential to Refinance
An installment loan enables people to sign a new contract for more funds if a need arises or to extend the contract if they cannot continue to make all payments as originally agreed. These options are not always available with revolving debt. The company that manages the revolving debt has the right to charge excessive fees, increase interest rates, and stop any future use of the card when someone misses a single payment or even if the payment is late.
Borrowers sometimes turn to credit cards because their credit ratings disqualify them for installment loans. Companies like Maxlend Loans make it easier for everyone to get the help they need. They require borrowers to have a regular income and a checking account but do not refuse loans because of past credit problems. The loans also have a streamlined application process that allows anyone that qualifies to have their money in about 24 hours.