In an ideal world, people 's income would always far exceed their expenses, leaving them with a substantial savings account to handle any emergency expenditures. In real life, however, most Americans do not have savings that are sufficient to handle unexpected financial crises. If the refrigerator must be replaced, someone falls ill or a car needs a costly repair, many people must take on a debt of some type to cover the expense. Although credit cards are popular for such emergency expenditures, an installment loan can be a better option.
Why Installment Loans Are Viable Alternatives to Credit Cards
Credit cards are a type of revolving credit. The issuer assigns a credit limit to your account, and you can make purchases up to that limit. Your account balance …show more content…
According to USA.gov, installment loans may be secured or unsecured. Secured installment loans include auto loans and mortgages; should the borrower fail to pay, the lender can take possession of the auto or property that was used as collateral to secure the loan. Unsecured installment loans do not require collateral. Student loans and personal loans are examples of unsecured installment loans.
Advantages of Choosing an Installment Loan Instead of a Credit Card
No two people have identical financial situations, so every individual should evaluate his or her circumstances to determine which option is best. However, although terms can vary by lender, installment loans typically offer the following benefits.
• The interest rate is usually fixed and lower than the interest rates on credit cards. Interest rates on credit cards can vary, especially if you have a late payment or exceed your credit limit.
• Monthly payments remain the same for the entire loan term or vary by only pennies. This allows predictable and accurate budgeting. Payments on credit cards are based on your balance, so they can vary a great deal from one month to the
Why Installment Loans Are Viable Alternatives to Credit Cards
Credit cards are a type of revolving credit. The issuer assigns a credit limit to your account, and you can make purchases up to that limit. Your account balance …show more content…
According to USA.gov, installment loans may be secured or unsecured. Secured installment loans include auto loans and mortgages; should the borrower fail to pay, the lender can take possession of the auto or property that was used as collateral to secure the loan. Unsecured installment loans do not require collateral. Student loans and personal loans are examples of unsecured installment loans.
Advantages of Choosing an Installment Loan Instead of a Credit Card
No two people have identical financial situations, so every individual should evaluate his or her circumstances to determine which option is best. However, although terms can vary by lender, installment loans typically offer the following benefits.
• The interest rate is usually fixed and lower than the interest rates on credit cards. Interest rates on credit cards can vary, especially if you have a late payment or exceed your credit limit.
• Monthly payments remain the same for the entire loan term or vary by only pennies. This allows predictable and accurate budgeting. Payments on credit cards are based on your balance, so they can vary a great deal from one month to the