Credit card is one of the most common causes of bad debt. Millions of people indulge in overspending and end up with an unmanageable credit card debt. Many such consumers opt for unsecured installment loans to repay the debt. Credit cards usually have a hefty rate of interest levied on the unpaid amounts after the initial thirty to forty five days. Yet, there are times when a credit card can come in handy to repay installment loans. Generally, it is unwise to repay any kind of debt with a credit card. It is like managing one debt with another. Such a practice is never pragmatic. However, there are instances when such a move makes sense.
Let us imagine a simple scenario. You owe a few hundred pounds to a private lender. There are monthly installments to pay. You are in a situation wherein you cannot pay an installment, perhaps more than one. The lender will levy penalties. There shall be late payment fines. Defaulting is never a good thing. You can try and extend the repayment term if a lender has the provision of such a renewal. Otherwise you will have to endure the penalties and also repay the loan with accrued interest. If you have a credit card and there is sufficient limit, then you can use it to pay the installment. The lender of course should have a provision to accept a credit card payment. Installments are usually paid through direct debit. The auto debit is set up at the time of the loan approval and disbursal.
The rate of interest applicable on unsecured installment loans is usually higher than the annual percentage rate applied on credit card debt. If you are using a credit card to repay installment loans, then you are not incurring a larger debt but you will have to bear the interest applied. In effect, you may save a bit of money.