Should An Auto Title Loan Be Used To Payoff Unsecured Debt?
If you are thinking loan using an auto title loan to pay off a credit card, you may just be looking at more financial problems in the near future. Yes, it is an option, but turning unsecured debt into secure debt is not always the best choice for many debtors.
For starters, compare the interest rates for the credit card and the title loan. Most often the auto title loan will carry a higher rate. If you happen to have an account with a credit card company which has increased your interest to an amount higher than average, you will then need to stop and think about payments.
Credit cards are revolving accounts. The monthly payment is based on the current balance. A percentage of the amount owed is calculated as the minimum amount due. A debtor will always have the option of paying more each month. Most of the minimum payment will be used towards interest fees for the month, so any time you can pay extra; it will be applied to lower the principle. It makes good sense to pay more than the minimum to keep the original cost of the purchase down.
Treating an auto title loan payment as you would a credit card would cause significant problems for your finances. The interest payments are high causing the debtor to pay see a sharp rise in the balance when the loan is not paid off on the original due date. Since these title loans are secured by your pink slip, missing payments are much more than a negative mark on your credit. Defaulting on an auto title loan will get your vehicle repossessed. This avenue will only lead you to more problems, financially and personally.
Closing credit cards are always bad news for credit scores, but closing ones with remaining balances are even worse. Anytime an individual feels the need to close an account, pay the balance off in full prior to doing so. This can be done by making a lump sum payment transferring the debt to other credit cards. Using an auto title loan to pay off a credit card is not productive for finances unless you can guarantee yourself that the money needed to pay it off will arrive in the next 30 days. If you cannot promise this to yourself, the option for a title loan to pay off a credit card should be omitted from your options. Prolong closing the credit card account until you can pay it off in a way which will not hurt your finances any more than necessary. Losing your vehicle because of a defaulted auto title loan is not the best approach to trying to save your credit score.
Know all your money options. Is closing the credit card truly the best option for you at the moment? If there is way you can pay down the balance without having to take out any kind of short-term loan, do it. Reorganizing your budget may prove to be a better option to solve your financial problem.
For starters, compare the interest rates for the credit card and the title loan. Most often the auto title loan will carry a higher rate. If you happen to have an account with a credit card company which has increased your interest to an amount higher than average, you will then need to stop and think about payments.
Credit cards are revolving accounts. The monthly payment is based on the current balance. A percentage of the amount owed is calculated as the minimum amount due. A debtor will always have the option of paying more each month. Most of the minimum payment will be used towards interest fees for the month, so any time you can pay extra; it will be applied to lower the principle. It makes good sense to pay more than the minimum to keep the original cost of the purchase down.
Treating an auto title loan payment as you would a credit card would cause significant problems for your finances. The interest payments are high causing the debtor to pay see a sharp rise in the balance when the loan is not paid off on the original due date. Since these title loans are secured by your pink slip, missing payments are much more than a negative mark on your credit. Defaulting on an auto title loan will get your vehicle repossessed. This avenue will only lead you to more problems, financially and personally.
Closing credit cards are always bad news for credit scores, but closing ones with remaining balances are even worse. Anytime an individual feels the need to close an account, pay the balance off in full prior to doing so. This can be done by making a lump sum payment transferring the debt to other credit cards. Using an auto title loan to pay off a credit card is not productive for finances unless you can guarantee yourself that the money needed to pay it off will arrive in the next 30 days. If you cannot promise this to yourself, the option for a title loan to pay off a credit card should be omitted from your options. Prolong closing the credit card account until you can pay it off in a way which will not hurt your finances any more than necessary. Losing your vehicle because of a defaulted auto title loan is not the best approach to trying to save your credit score.
Know all your money options. Is closing the credit card truly the best option for you at the moment? If there is way you can pay down the balance without having to take out any kind of short-term loan, do it. Reorganizing your budget may prove to be a better option to solve your financial problem.
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