The tendency with most people is to turn to our credit cards every time they need money urgently. While nobody prefers borrowing money, many people believe credit cards to be a safe way for borrowing, simply because they can borrow again if needed. Though, they see the advantage in that, taking a credit card comes with many more disadvantages. The biggest one of them is finding yourself in a tricky financial situation after you are unable to make repayments for your credit card.
In such a situation, many people try to clear their credit card debts by getting a loan from lenders that charge high interest rates, sometimes with collateral. This scenario can simply be explained as jumping from one debt to another one. Moreover, it proves to be of no help, if you hold multiple credit cards.
However, appearing like the silver lining in the darkest clouds, instant loan apps offer you chance to break free of your credit card debt. To understand how they do that, you need to understand how credit cards can negatively affect your finances.
Why credit card debt is dangerous
Many people, over a long period of time, issue multiple credit cards. The reason for this is usually that they are approached by banks with attractive credit card deals, for which they were apparently ‘pre-approved’. These credit cards do not necessarily have to be the usual traditional credit cards. They can be petrol cards that lure you by offering nominal rewards for using them at petrol pumps. They can be shopping cards that qualify you for special offers and discounts at specific merchants. They can also be air-miles card that reward you with free miles for your future flights. All of these along with your general use credit cards put you under a mountain of multiple credit card debts and you may not even realise it.
In a short amount of time, you may be under a debt worth lakhs of rupees. In such a situation, many individuals have a grand illusion of being in control of your situation, especially if they are making their interest payments regularly. This situation usually arises with individuals that operate on a fixed monthly salary that is just enough to manage the interest payments. Hence, all their income goes towards making interest repayments and personal expenses. In such a situation, even though your debt may not be growing, it is not shrinking either. This keeps you trapped under the debt and having no extra income for urgent expenses.
In such a scenario, if you are faced with unfortunate situations like loss of job, medical emergencies, etc., you do not have any funds to manage the situation. This also means that you will most likely be unable to make any payment for your credit cards. That is where the problem shows its head and you are left with no way to deal with it. To make matters worse, to manage a situation like this, you may have to borrow even more money to pay for the penalty interest charged on all the cards you have. If you choose not to, this penalty is added to your total credit card debt. The point is, either way, your debt just went up by a large margin.
How instant loans can help
Many people that already are in heavy debt usually develop a fear of borrowing money at all. Hence, they fail to realize how instant loans can help in managing credit card debt. Taking instant loans to manage credit card debt is known as a concept called debt consolidation. The basic idea is to take an instant loan to pay off all your credit card debt. This way, you not only get rid of your credit card debt, but also convert multiple debts into one. To know further about how that can be an advantage, you need to understand the benefits of using instant loans to manage credit card debt. They are:
Lower interest rate
Interest rates for instant loans are much lower than the average interest rate of credit cards. The total interest credit card users may be paying for their credit cards are an average of 40%. However, instant loans have much lower rate of interest and what percentage it may be differs from lender to lender.
In the case of credit cards, there is no concept of tenure. However, they do have a spending limit. In terms of repayment, as long as you are making interest payments on time, banks will not concern you with the rest of the amount. While this may appear as an advantage, it means that the principal debt remains intact. On the other hand, instant loan lenders allow you to choose your loan’s tenure. Hence, if you are unable to pay back credit card debts in a year, so you can choose to consolidate through instant loans and pay it back in 3 years or more.
Credit card repayments do not have a fixed monthly EMI. Instead, they have a minimum payable amount, which is basically the interest accrued over the span of one month. On the other hand, instant loans allow you to indirectly select the monthly repayment amount for the loan. This amount is directly related to the tenure of the loan. Hence, if you want to pay a smaller amount as monthly repayment, you simply need to opt for a longer tenure. Moreover, the EMI for an instant loan includes parts of both interest and principal amounts. This means, as you make your monthly repayments, your debt decreases until it is completely gone.
Improves credit score
Your credit score is based on the amount you have borrowed and your capacity to pay it back. If you’ve had a lot of credit card debt for a long time, your credit score will be negatively affected. This, in turn, reduces your chances of getting any form of credit in the future. In such a case, taking an instant loan to pay off your credit card debt is a good idea. This way you payoff multiple credit card debts and set yourself on the path to pay off another one through comfortable EMIs. Doing so will enhance your credit score.
The basic idea of using instant loans for managing credit card debt is to take pressure off you. This pressure is caused by having to make multiple payments for multiple lenders. Hence, the biggest benefit of using instant loans for credit card debt management is that it allows you to pool all your small debts to create a large one. Doing so will reduce the number of people you owe money to one.
Taking a debt through credit cards is, sometimes, unavoidable. However, that does not mean that you have to suffer with that debt till eternity. As with any type of debt, it is only a good thing until you can easily pay it back. Hence, if you have been struggling to pay your credit card dues, you should consider taking an instant loan to clear them off.