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Although many payment choices come down to personal preference for certain types of purchases, it’s better to make a conscious choice. Ask yourself a few questions about the payment and funding method:
Cash is real and immediate. When you use cash for purchases, there are no approvals required or interest charged. But when it comes to paying for big-ticket items like a large appliance or a major expense, few people have enough funds on hand to pay in cash.
Using a credit card can give you extra time before you have to pay your next credit card bill. If you're using a credit card, it's a good practice to pay your bill in full each month. When using a credit card, be careful because it can be easy to purchase more than you can pay off each month, allowing balances to grow and interest charges to accrue. If you run up high credit card balances, paying off the debt can affect your budget and impact your other financial goals.
Loans can be useful for certain purchases or financing needs. A personal loan may be helpful for consolidating debt, financing purchases, funding renovations on your home, or other expenses. Other types of loans may be secured by collateral, such as an auto loan. Depending on the type of loan, it may also have a fixed rate, fixed term, and fixed monthly payment, which might be helpful for your budget.
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Before you apply, we encourage you to carefully consider whether consolidating your existing debt is the right choice for you. Consolidating multiple debts means you will have a single payment monthly, but it may not reduce or pay your debt off sooner. The payment reduction may come from a lower interest rate, a longer loan term, or a combination of both. By extending the loan term, you may pay more in interest over the life of the loan. By understanding how consolidating your debt benefits you, you will be in a better position to decide if it is the right option for you.
LRC-0620