Using an Installment Loan With Low APR to Pay a Credit Card Debt

There is one obvious advantage of using an installment loan with the low APR to pay off a credit card with a high rate of interest. The foremost advantage will be that your monthly payments are likely to reduce owing to the lower rate of interest. You will have a fixed installment to pay every month. This will reduce the monthly financial burden to you and is an advisable course to take if the monthly payment on your credit card debt is something that you can no longer afford to pay. Using an installment loan to pay a credit card debt may be the only way to get out of debt while being able to meet your other expenses as well.

The question whether you will save any money in the long run by using the installment loan to pay a credit card depends on the tenure of the installment loan. It is typical for a closed ended installment loan to have a longer duration. While the longer tenure of the loan also helps in reducing the amount of monthly installments the amount that you end up paying by the end of it may not be much different than what you would have paid if making the payments directly onto your credit card.

For example, if it takes you three years to pay off a credit card making a payment of $300 each month it will cost you $10,800 to pay off your debt. If the payment for the installment loan is $200 per month owing to the lower rate of interest and it is repaid in the same period of time you will say $3600. However if it takes you five years to pay off the installment loan at $200 per month you will end up paying $12,000 to repay your loan. So at the end of the day while an installment loan will decrease your monthly installments each may or may not save money in the long run.

You can use the debt repayment calculator to get a better idea of where you stand in which option to take to pay off your credit card rate at a given rate of interest.