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The Battle is On – Installment Loans Vs Credit Card Debt

Have you taken up any resolution this New Year to pay your outstanding debts and researching for ways to put an end to that? A question might arise somewhere in the
back of your mind is to which amount to pay first, should you pay credit card debt or the installment loans such as home equity, car or student loans!

The installment loans online, which you applied for some time, back to resolve your emergency need equal monthly amounts of repayment. Whereas the credit card debt
carries a minimum monthly payment that keeps on changing as per your outstanding balance. But consumers tries to pay their credit card debt every month.

So which one should you pay first to cope up with huge debt amount?

Credit card debt that is what you need to focus upon – you will come across several good reasons to give importance to your credit card debt over an installment loan. In the beginning, the parameter, which you need to consider, is credit score. When you pay down the credit card debt, you reduce the subdued amount thus increase the credit available to you, translating into high FICO score.

When you pay short-term installment loans, this shows on your credit report and it will not have much impact, as says the credit-reporting agency. It is rather important to pay your installment loan outstanding steadily throughout the loan life to turn it more beneficial. In addition to that, making on time monthly payments against your open account will count higher than making payment on a closed account.

Further, consider your credit card statement with your mortgage or home equity or car loan, the only number that will make us jump is the interest rate. We know that a credit card has a higher rate of interest compared to an installment loan, but there are instances when the latter has a 10% higher interest rate. This is yet another reason people choose to pay their credit card debt prior to installment loan bills.

With a mortgage installment loan, you may become entitled to a tax benefit that too in the form of deductible interest.

In the end, if you have currently transferred debt to a 0% APR balance transfer credit card or thinking to take an advantage of the offers on balance transfer credit card. You obviously want to pay off the balance before 0% offer expires. So try to save by paying out your credit card debt fast prior to installment loans.