If you find yourself in a predicament where you’re running low on cash, but you have debts to manage and payment deadlines to reach, you may want to consider borrowing some money. However, before you begin looking for a solution, you may want to take a closer look at your debts to give you a better time handling them.
You can consider opting for an installment loan or a revolving debt to answer your problems. Installment loans involve borrowing money from a direct lender or a bank that comes in a fixed amount, which you have to return on time. Meanwhile, revolving debt lets you borrow money, but it can only reach a specific amount.
While you can acquire as little or as much money you require with revolving debt, once you pay your lender back, you can proceed with borrowing more than before. If you’re unsure which one you need to take care of your finances, keep reading below to determine their differences. That way, it’ll give you a better time deciding so you can pay off your dues.
What Is an Installment Loan?
Installment loans are loans you apply for and acquire from banks, lenders, and credit unions. Some standard types of installment loans are small personal loans, mortgage loans, and auto loans. Since they come with fixed interest rates, even before you begin taking out the loan, you already know how much you have to pay back each month, so there are no surprise costs involved.
However, there is another option for applying for an installment loan online called variable rates, which involves having the interest rate linked to a financial index like the prime rate. With a variable rate installment loan, the amount can tend to go up and down.
Although your total payment can change when you opt for a variable rate loan, the due date of repaying it will remain the same. The only thing that differs is the amount of your payment because it fluctuates at the same time as its interest rate to keep you from missing your deadline.
Typical installment loans will require you to pay back your lender each month. But rather than assuming, it’s safer to ask your direct lender about your loan and its policies. If you decide to get a fixed-rate loan, you can also expect to know your loan’s total amount before pushing through with it. Since you’re already informed upfront of all the expenses involved, you can prepare for it.
What Is a Revolving Debt?
Revolving debt is different from an installment loan. It includes home equity lines of your credit and your credit cards. You’ll be dealing with a maximum borrowing limit with revolving debt, but it’s ultimately up to you if you wish to take out only a tiny portion of your line of credit.
Depending on your lender, they could provide an open-ended revolving debt, letting you borrow and return the money within an indefinite period for as long as you wish. The situation usually involves your credit cards.
On the other hand, some lenders will only approve your line of credit to remain open for a limited time. For example, you can only borrow money for up to ten years if you’re hoping to receive a home equity line of credit.
Unfortunately, seeking a revolving debt won’t allow you to know from the get-go the total amount of what you’ll be borrowing or even when you can pay back your debt. Since you’ll be taking out and repaying your loan multiple times so long as your line of credit remains open, your payment and interest rates will keep changing according to the amount you borrow.
Now that you have a better idea about how an installment loan and a revolving debt works, you may be more confident to choose the program that works for you. Remember to take your time and consider all the factors involved, such as your financial situation, needs, and debts. Knowing if you can pay your debts on time or not, how much money you wish to borrow, and if you can handle your repayments can help you decide which loan option you need best.
Are you looking for direct lenders for installment loans in Memphis, TN? Shelby Finance is a loan company that offers personal loans and installment loans for people in need. Get in touch with us today to apply for a loan!