In this day in age, living without some line of credit is nearly impossible. With credit being a necessity to purchase a home or car and when renting, it is of no surprise why roughly 79% of Americans have at least one credit card. Although credit is a mainstay in the modern society, people are often unaware of the type of account they have.
When you open an account with a creditor or lender and sign on the dotted line, you are effectively in a binding contract with that entity, but do you know for sure the type of account you agreed to open? While it may be apparent to some experienced consumers, many new borrowers aren’t too sure of the kind of accounts they open, much less how they differ. Here’s what you should know about revolving credit and installment loans.
Revolving credit automatically renews when the account is paid off. Credit cards are the most common type of revolving credit accounts. You have a set credit limit as to the amount you can charge to the account on a monthly basis, and you have the option of paying your balance off monthly or making partial payments.
These accounts have minimum required monthly payments and remain open even after you pay off the balance entirely. The debts on these accounts are unsecured as they are not tied to any individual item.
Installment loans are a bit different. With an installment loan, you borrow a set amount of money and agree to make monthly payments over a specified period of time until it is paid off. A prime example of an installment loan is a car loan. You get to drive off of the lot in the vehicle of your choice upon agreeing to pay “X” amount of money over “X” amount of months.
Other installment loans are personal loans, student loans, and mortgages. Once you finish paying off the loan, the account closes. A majority of these accounts are secured loans as they may be attached to a home, car, or some other item.
Although different at their core, both types of accounts have many similarities. For starters, you must submit to a credit check before you can get approved for a loan or credit card. What creditors and lenders are checking for is your trustworthiness. Your credit history will help determine whether or not you qualify, — and if you do — what your interest rate and minimum monthly payment will be among other things.
Another similarity is that defaulting on either account may lead to debt collection calls from the original creditor, lender, or a third party collection company. With home and auto loans being secured debts, the lender will likely make minimal collection attempts before seizing the property.
With unsecured debt, however, collection attempts will likely persist as the debt isn’t tied to any specific item that they can simply reclaim. This often results in debtors being subjected to relentless collection calls that often violate federal regulations.
No matter how much you may owe on an account, creditors cannot violate your consumer rights. The Fair Debt Collection Practices Act (FDCPA) outlines strict limitations all debt collection companies must operate within. When they violate statute regulations, you have the right to pursue legal action.
The Florida FDCPA and TCPA attorneys at The Law Offices of Jibrael S. Hindi can help you secure the compensation you’re entitled to by law. Under the FDCPA you may recover up to $1000 for harassment by debt collectors, and under the TCPA you are entitled to between $500-$1500 PER CALL OR TEXT! Contact us today at 1-844-JIBRAEL for a free case evaluation.
Remember, you will never need to pay our lawyers to pursue an FDCPA case. We get paid by the debt collectors.