Many people wonder how long they should keep paying back their credit card bills and how much money they should borrow until their next paycheck. In some cases, you may find that a loan can be helpful but not when you need money to make certain purchases.
While it is always a good idea to pay off your debts as soon as possible, there are situations where it may not be worth the time and trouble. Here are some examples:
A loan may be helpful if you owe a large balance on your credit card
that you plan to pay off over time with a lower interest rate. The lower interest rate will help you stay out of debt and help you get out of debt quicker. You may also be able to set up a revolving line of credit in your bank account to pay off debt quickly. This will cost you money up front but it will save you money in the long run.
If you are planning to buy a car or move into a bigger home, you may need to borrow money until your next paycheck. This will allow you to get the necessary funds needed to make your monthly payment on time.
Or you may need to borrow money while you wait for your current car or house to be paid off. By borrowing against the equity in your home or car, you can get a good rate of interest on the amount you borrow.
Short term cash for a specific purchase
Sometimes, the fact that you are short on cash for a specific purchase will cause you to miss the window for buying something in that price range. Once the item has been purchased, you will have access to the funds and you will be able to make the purchase at whatever price you were paying.
If you have poor credit, you may not be able to borrow at all. The main reason for this is that if you are unable to make payments in a timely manner, you may have defaulted on your loan and could face penalty fees or worse.
You should have a repayment plan worked out and established before you borrow. It is important to be able to pay your loan back on time so that you can be sure that you will have access to the funds you need for your repayment.
Banks offer loans to customers with poor credit
If this option is chosen, you will have a much better chance of qualifying for a loan if you are able to show proof of your income.
If you find that you cannot repay your loan on time, you will be charged late fees, possibly a penalty fee and worse. However, if you pay your bill on time, this type of financial hardship will help to reduce your future fees and interest rates.
Many individuals decide to use a loan to make ends meet rather than facing bankruptcy and having to pay even higher interest rate or a high penalty fee. Instead of using your credit card debt to pay for basic needs, it may be more prudent to seek a loan.