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Installment Loans: When to Use Them for Debt Consolidation


Who Might Need an Installment Loan
People with high credit card balances or other types of debt have tons of options available for paying their balances down as quickly and cheaply as possible. You could hire a debt consolidation company to lower your amount owed through a debt settlement, but that comes with repercussions that could follow you for years.

You could also consolidate your credit card debt on your own by taking out an installment loan. This can be especially advantageous if you have trouble keeping track of multiple due dates for several credit cards.

If you’re paying an extremely high interest rate on your credit cards, compare rate offers with installment loan companies to see if you can save money on your monthly interest rate payments. This could either relieve your financial burden every month or help you put more cash towards your principal.

That way you can pay down your debt faster and save even more money on interest in the long run.

How Installment Loans Work
Typically, installment loans are short term loans that you repay over a predetermined period of time. You’re charged a fee that is included in your monthly payment. The length of time could last anywhere from a few months to a few years. The loan amount also varies anywhere from $100 to thousands of dollars, depending on your needs.

Because borrowers with poor credit can often be approved for installment loans, the interest rates and fees are usually higher than traditional personal loans. Additionally, the loan can be refinanced to modify the terms if you are having trouble making your monthly payments.

Advantages of Installment Loans
Many people prefer installment loans over payday loans because the monthly payments are fixed. You won’t be surprised by how much you owe each month and there won’t be an expensive balloon payment at the end of your loan term. Installment loans often have lower payments than payday loans because you can spread them out over a longer period.

While a payday loan typically lasts just a few weeks before you’d need to roll it over, you can get an installment loan for a year or more if you need to. Just be aware of your interest payment because you might end up paying much more than you otherwise would if you paid off the loan quickly.

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