Unless you’re independently wealthy, there have been times when money was tight and you found yourself in need of credit or at least access to it. You are not alone. Millions of employed Americans go to work every day, pay their bills and still experience financial difficulties. Years ago, almost all of the big banks did away with personal unsecured loans. Since consumers who used those small installment loans to help them through a rough patch had to look elsewhere, credit card abuse ran amuck in the U.S. In some cases, people went crazy and made purchases they couldn’t afford at the time; others fell deep in a debt ditch by paying minimums on escalating balances over time. The latter remains the biggest culprit in the national credit card catastrophe. In the past year, credit card users have seen a slight reduction in their interest rates. Unfortunately, their balances were accumulated at the former higher rates. Coincidentally, installment loans are now becoming more available as a way to fill needs left by almost non-existent personal bank loans. While either of those provides consumer access to credit for goods and services, both credit cards and installment loans leave room for debate. Bellow I’ll address the differences so you can compare them equally then decide which option fits your needs. The Good, Bad, and Ugly truths to Credit Cards
- Hundreds of offers depending on your credit rating
- You could get declined if you have a poor credit history
- Some cards are issued with a free annual membership
- Some cards are issued only after an applicant deposits money up front
- Annual Percentage Rates can increase without account holder’s permission
- Some cards offer cash back or a rewards program but only when the applicant has an extremely high credit score
- Can be used to make purchases when you don’t have cash
- High balances + Minimum Payments = Years to pay off
The Benefits and Deficits of Installment loans Can be very helpful when in planning a monthly budget
- The rate will not change during the life of the loan
- Since it isn’t a revolving credit product, once the loan is accepted, the balance must be paid off before another loan can be given.
- Once a loan is accepted, the borrower will not endure interest rate increases
- Cash is deposited directly into the borrowers account
- Fixed rate loans help borrowers learn how to manage their finances better because the payment amount is the same every time
- Installment loans are typically easier to obtain because financial institutions that offer them use non-traditional credit reports
- The loan cycle, from funding to payoff, is purposely limited and thusly places a ceiling on fees.
Hopefully, you won’t have a reason to shop for a credit card or installment loan. But if you do happen to find yourself in need of a financial product that provides access to credit and or cash, you’ll be armed with enough information to choose what works best for you.
