Paying college tuition is a huge undertaking, leaving some people looking to credit card loans as a viable solution. Credit card loans remove some of the traditional barriers to loans, such as applications. Additionally, with a credit card loan, you can pay in installments and won’t need to provide a credit check. While this all sounds very tempting for borrowers, it’s important to weigh the pros and cons and determine if a credit card loan is the best solution for you.
If you are struggling to pay your student loan debt, student debt attorneys are a great resource for getting back on your feet. Here are some important things to consider about using credit card loans to pay for college tuition.
What Is a Credit Card Loan?
Credit card loans allow you to borrow money against your credit limit; however, they are not cash advances. In this way, they function similarly to personal loans. The main difference is that credit card loans take up a portion of your credit line. They also differ from cash advances, which usually have low dollar limits, high interest rates, and fees. Alternatively, credit card loans have fixed interest rates that are usually much lower than those on a cash advance.
The amount of money you can borrow from a personal loan depends on your credit card limit. If you are approved for a credit card loan, you will receive a deposit in your bank account, which you will then repay through installments over the repayment term. Typical repayment terms vary from six months to five years, and your payments on a credit card loan are added to your card’s minimum payment.
Credit Card Payment Plans
Credit card payment plans are not the same as credit card loans. These plans allow cardholders to repay their loan in installments. Depending on the lender, the installments will include a fixed interest rate or monthly fee. Unlike a credit card loan, you don’t receive a lump sum of cash in your bank account. Instead, you choose a purchase on your credit card and create a plan to pay it off over time. Additionally, any purchases you place on a payment plan will be counted toward your credit limit.
Should You Take a Credit Card Loan to Pay for College Tuition?
Whether or not you should take out a credit card loan to pay for college tuition will depend on your situation. You might consider using a credit card loan if you meet any of the following conditions:
- You lack savings. Accessing funds through a credit card loan can provide a lifeline for someone experiencing financial hardship. This could apply to tuition itself or other funds you are struggling to pay as a result of having to put significant funds towards your education.
- You want a streamlined loan and payment plan. Credit card loans lack some of the steps associated with traditional borrowing: you don’t have to complete an application or credit check. For someone looking to easily access cash and have a relatively straightforward payment plan, a credit card loan may be a good option.
- You want predictable payments. Before you go through with a credit card loan, you’ll be able to see the monthly payment on the loan and determine whether it fits into your budget. This allows you to understand the loan terms upfront.
- You don’t qualify for other credit. Increasingly, lenders are placing tougher eligibility standards on lending services, including student loans and home equity loans. If you can’t qualify for other kinds of loans, a credit card loan may give you access to affordable credit.
If any of these criteria reflect your situation, credit card loans may be a viable path to explore. However, as with any financial decision, it’s imperative to take a thorough look through all the pros and cons before making a decision. Some of the drawbacks of credit card loans include:
- Your total credit utilization will increase. The money you borrow through a credit card loan is considered part of your credit limit. This means when you take out a credit card loan, the amount of credit you’re using increases, which can potentially impact your credit score.
- You may pay more in interest. It’s important to consider whether you’ll likely pay off your debt early or over a longer time frame. Examine the loan’s terms and determine how much interest you’ll have to pay.
- You don’t earn rewards. Unlike on a credit card, with a credit card loan, you won’t earn points, miles, or cash back. Since a credit card loan will take up a good chunk of your line of credit, you’ll have less room for spending that is eligible for rewards.
If you are trying to decide if a credit card loan is right for you, these are a few important factors to take into consideration. The best way to determine if you should use a credit card loan for your college tuition is to work with a skilled student loan lawyer.
Contact a Skilled Student Loan Lawyer
If you are struggling to figure out the best way to pay for your college tuition, consider working with a skilled student loan lawyer. At McCarthy Law, our attorneys are dedicated to helping students navigate the complexities of the student loan system. Under our student loan debt settlement program, our licensed attorneys negotiate with lenders to ensure our clients pay only a fraction of their original loan balance.
To schedule a consultation with one of our skilled student loan settlement attorneys, call (855) 976-5777 or fill out our online contact form.