Credit card loans – Things that you should know
In today’s world, most of us are dependent upon credit cards. Most of us take out credit card loans when we are in need of money. The plastic money is so easily available that it has made us dependent on them. You should be very careful when you take out credit card loans as it can be a debt trap for you and you will face problems in getting rid of the credit card loans. You should always remember that any kind of loan is an obligation and in order to get rid of this obligation, you need to pay it off. Unless you have the capability to pay off the loan, you should not take out credit card loans.
Things to know about credit card loans
Here are certain things that you should know about credit card loans. Let’s take a look:
Unsecured, short term loans: Well, the credit card loans are unsecured. Thus, there is no collateral attached to this loan. You will not have to lose any property or asset if you are unable to pay off the loan. The lender may charge off the debt and assign it to a collection agency when you are unable to pay off the loan. You will have to pay them off in full within a short span of time.
High interest rate: As the credit card loans are unsecured loans, the interest rates charged on these loans are quite high. Unless you have the financial capability of paying off such high interest rates, it is better to go for credit card loans. If you cannot pay off the high interest rates, you will be in default. Late fees and charges will be attached to the loan which will make it further difficult for you to pay off the loan with bad credit. So, you should be careful enough while taking out these loans.
Impact on credit report: Too much of credit card loans may have a negative impact on your credit report and may lower your scores. If you default on the loan, then it will further negatively impact your credit report. Moreover, too much of credit card loans will also increase your debt to income ratio. This will make it difficult for you to qualify for any other type of loan. So, you need to be careful about that as well.
Non-payment of dues may not lead to jail: You will not be taken to jail for not paying your credit card loans as there is no debtor’s prison. However, other legal issues may arise if you are unable to pay off the loan. The creditor can file a lawsuit against you. If he gets a judgment, then he can place a lien on your property or car and when you sell any of these, you will have to repay the creditor. Many a times, the creditor may even force you to sell off your assets to pay him off. Moreover, a judgment will be mentioned in your credit report which will have a negative impact on your credit scores.
Now that you know some of the basic things about credit card loans, you can easily decide whether or not you should go for this option.
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