Credit Card Minimum Payments Vs. Unsecured Loan Installments

By: Sarah Dinkins
Submitted: 2007-01-17 16:16:51
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When you have financial problems, credit cards instead of being a blessing turn out to be an incredibly heavy burden. Financing unpaid balances is extremely expensive and your minimum payments keep increasing eating up your income till you finally won’t be able to meet the payments.

Credit Card’s Payments

Though the flexibility credit cards provide is undoubtedly useful in normal situations, you can easily feel tempted to reduce the amount of money you destine to pay your credit card balances and use it for other expenses. Since credit cards let you pay only a small portion of the balance, the temptation is big but doing so can bring many problems to your financial health.

The interest rate charged for credit card financing can be as high as 25% on an annual basis. Such a high rate, if the balances remain unpaid, implies high amounts of money on interests that keep being added to your debt. If you pay only the minimum this situation is aggravated because eventually as your debt increases, you won’t be able to pay the minimum and when that happens, you’ll incur in penalty fees that will increase your debt even more. Moreover, due to the delinquency, the credit card company will increase the interest rate charged and you will enter into a vicious circle of debt.

Unsecured Personal Loan’s Installments

A solution to this problem is to obtain an unsecured personal loan in order to cancel the credit card balances in full. Unsecured Personal Loan’s Installments have many advantages over regular credit card payments that turn them into an excellent option if you wish to take control over your debt and start repairing your credit.

For starters, the interest rate charged for unsecured personal loans is significantly lower than the interest rate charged for financing unpaid credit card’s balances. While unsecured loans carry interest rates that range from 7% to 16%, Credit Card’s rates can reach up to 25% and are almost never lower than 14%

Moreover, while the minimum payments on credit cards are variable and include little principal, the unsecured personal loan’s monthly payments can carry fixed rates and thus be equal throughout the whole life of the loan. Besides, the monthly installments include interests and principal as well so you’ll be continuously reducing your debt by repaying the loan.

If you are smart enough to get rid of most of your credit cards but one or two after you repay the balances and refrain yourself from using them for unnecessary expenses, then your unsecured loan installments will also contribute to stopping the vicious circle of debt and start a virtuous circle of debt elimination. That way, you’ll be able to gain control over your finances again.

Sarah Dinkins is an Expert Loan Consultant in the financial industry who helps people to repair their credit situation and get approved for home loans, unsecured personal loans, student loans, consolidation loans, car loans and other types of loans and financial products. In her website http://www.badcreditfinancialexperts.com she writes useful articles for people looking for professional advice in the finance field.

Article source: Expert Articles

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