In this article, we’ll discuss why it’s important to pay credit card bills on time, when the best time to pay your credit card bill is, and the benefits that can come along with paying off your credit card bill early.

• Why is it Important to Pay Credit Card Bills On Time?
• How Do You Know When to Pay Off Your Credit Card?
• Is It Better to Pay Your Credit Card Before the Due Date?
  • Helps Reduce Your Credit Utilization
  • May Help Increase Your Credit Score
  • Helps Reduce Your Interest Charges
• Get an Avant Credit Card Today
• Explore More Financial Support Resources

Why is it Important to Pay Credit Card Bills On Time?

Paying your credit card bills on time is extremely important for maintaining a good credit score. Late payments can have a negative impact on your credit history and lower your credit score, making it more difficult to get approved for loans or credit cards in the future. In addition to this, late payments could result in late fees, which can add up quickly and could increase your overall debt. If you repeatedly make late payments, your credit card issuer may lower your credit limit and/or could increase your interest rate, which could cause you to pay more in interest charges over time. 

Additionally, some credit card issuers may report late payments to credit bureaus, which could also affect your credit score. Late payments could have a domino effect that can spiral out of control which may have long-term consequences on creditworthiness.

How Do You Know When to Pay Off Your Credit Card?

The first step is to understand your monthly credit card billing cycle. This is the period of time between when your credit card statement is generated and the payment due date for that statement. The minimum payment is the minimum amount you are required to pay by the due date to avoid late fees and keep your account in good standing.

To avoid interest charges, you should aim to pay off your credit card statement balance before the due date. The statement balance is different from the current balance, as the current balance typically reflects the total amount that you owe at any given moment. Generally, you should prioritize paying off your statement balance, which, if paid in full by the due date, will help you to avoid paying interest changes. If you can’t pay the full balance, you can minimize the interest charges by paying as much as possible above the minimum payment. 

A tool that you could leverage to pay off your credit card bill without needing to remember the due date is automatic payments for the full amount.  Most credit card issuers, like Avant, offer this convenient option so you don’t have to worry about forgetting to pay off your credit card bill or making a payment.  If you choose to go the more manual route, you could also consider setting up reminders on your phone or writing them down. 

Is It Better to Pay Your Credit Card Before the Due Date?

Paying off your credit card bill early could be a great way to avoid interest charges and help better manage your debt. It could also help you avoid late fees and may improve your credit score by showing that you are responsible with your credit. And, there are some extra benefits you might see when you pay your bill early.

Helps Reduce Your Credit Utilization

Paying off your credit card bill early could help reduce your credit utilization, which is a key factor that affects your credit score. Credit utilization is the ratio of how much credit you are using to how much credit you have available. The lower your credit utilization, the better it  could be for your credit score. When you pay off your credit card bill early, you reduce the amount of credit you are using, which in turn lowers your credit utilization ratio. This could help improve your credit score and may make it easier for you to get approved for loans and credit cards in the future.

May Help Increase Your Credit Score

Paying your credit card bill early may increase your credit score for a few reasons:

1. Payment History: One of the most important factors that affects your credit score is your payment history. When you pay your credit card bill early, you demonstrate that you are responsible and reliable when it comes to paying your debts. This could help improve your credit score by showing that you are a lower-risk borrower.
2. Credit Utilization: As mentioned earlier, credit utilization is the ratio of how much credit you are using to how much credit you have available. When you pay off your credit card bill early, you reduce the amount of credit you are using, which may help lower your credit utilization ratio and could improve your credit score.
3. Avoiding Late Fees: Late payments could have a negative impact on your credit score. By paying your credit card bill early, you may avoid late fees and the negative impact they could have on your credit score.
4. Showing Financial Responsibility: Paying your credit card bill early shows lenders and credit bureaus that you have the financial discipline to manage your credit and pay your bills on time. This could help establish a positive credit history and increase your credit score.

Helps Reduce Your Interest Charges

Paying your credit card bill early may help reduce interest charges in a few ways:

1. Interest is calculated based on the outstanding balance: Credit card interest is calculated based on the outstanding balance on your card. When you pay off your credit card bill early, you reduce the outstanding balance, which in turn may reduce the amount of interest you will be charged.
2. Avoiding Interest Accumulation: Most credit card issuers charge interest on a daily basis, so the longer you carry a balance, the more interest you may be charged. By paying off your credit card bill early, you can avoid interest accumulation and save money in the long run.
3. Reducing the length of time you pay interest: Interest is also calculated based on the length of time you carry a balance. By paying off your credit card bill early, you reduce the length of time that you pay interest on your card, which may help you save money.
4. Avoiding penalty interest rates: Some credit card issuers may increase your interest rate if you repeatedly make late payments. By paying off your credit card bill early, you may avoid penalty interest rates which could help keep your interest rate low.

Get an Avant Credit Card Today

With an Avant Credit Card, you could get the buying power you want and take steps toward building your credit at the same time with responsible use. Applying is easy and seeing if you qualify will not impact your credit score. Just fill out Avant’s simple application and you’ll get a decision as soon as possible.

Explore More Financial Support Resources

Paying off your credit card bill on time and in full may help you avoid interest charges, maintain a good credit score and save you money in the long run. It’s important to understand your monthly billing cycle, minimum payments, and to set reminders to pay on time or early. To learn more about making Avant Credit Card payments, check out our Help Center, contact our customer support team, or review your credit card statement for more information.

Avant also offers access to additional financial resources through our partnership with SpringFour to help you move financially forward. Learn more about options available to you.

Avant branded credit products are issued by WebBank.

The information provided on this website does not, and is not intended to, constitute legal, financial, or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal, financial, tax or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; Avant does not recommend or endorse the contents of the third-party sites.

222 W Merchandise Mart Plaza, Suite 900, Chicago, IL 60654

Avant branded credit products are issued by WebBank.

Connecticut consumers: all marketing efforts are associated with Avant, LLC, Small Loan Company License #SLC-1246731

Avant of Washington, LLC DBA Avant is a wholly-owned and operated subsidiary of Avant, LLC Nationwide Multistate Licensing System #1440089.

Avant, LLC Nationwide Multistate Licensing System #1243761.

THIS IS A LOAN SOLICITATION ONLY. AVANT, LLC IS NOT THE LENDER. INFORMATION RECEIVED WILL BE SHARED WITH ONE OR MORE THIRD PARTIES IN CONNECTION WITH YOUR LOAN INQUIRY. THE LENDER MAY NOT BE SUBJECT TO ALL VERMONT LENDING LAWS. THE LENDER MAY BE SUBJECT TO FEDERAL LENDING LAWS.

The post When to Pay Off Your Credit Card Bill appeared first on The Avant Blog.

It is important not to panic if you find yourself in this situation. Rather, take a moment to understand how debt collection works, what rights you have, and what options are available to you. Here is what you need to know to move financially forward.

What is Collections?

Debt collections happen when an unpaid debt gets assigned to a debt collector. Debt collectors are often third-party companies or agencies that work on behalf of another company to collect debts. If working for the original creditor, the debt collector will receive a percentage of the debt collected. Otherwise, the debt can be sold to a debt collection agency for pennies on the dollar after you fail to pay back the debt to the original creditor. The agency will then pursue you for the debt.

When Does an Account Go to Collections?

There is no ‘set rule’ on how long it takes for your debt to go to collections. The only thing for certain is that the clock starts ticking on the debt being turned over to a collections agency the moment you don’t pay a bill. It also depends on the type of loan. Generally, credit card debt that remains unpaid longer than 30 days is turned over to a collection agency. Foreclosures or unpaid mortgages can take much longer and are dependent on laws in the state they were issued.

In most cases, lenders will try to collect the debt themselves before resorting to writing it off and passing the collection to another party. The debt is then reported to the credit bureaus as a “charge off,” meaning the original creditor has ceased efforts to recover the debt. After a debt is canceled, the creditor may send you a Form 1099-C, Cancellation of Debt showing the amount of cancellation of debt and the date of cancellation, among other things. Be sure to have this form handy when you are filing your taxes.

How Collections Works: What Happens When You Get Sent to Collections

Debt collection might vary slightly based on the company that’s collecting a debt. However, the process is basically the same. If you have unpaid past-due debt, your original creditor will typically notify you through written notices and phone calls. If you have a credit card that you stopped paying, your lender will make an attempt to contact you to get the amount current. If they are unsuccessful in getting you to pay what you owe, it will eventually stop. That’s usually when the debt transfers to collections.

The debt collection agency will then use the information on file to contact you. They may use your current address, your phone numbers and even contact information for your relatives. Personal banking information, including savings and investment accounts, may also be used to determine if you have the money to repay a debt. Some states allow wage garnishment to collect old debts.

Reputable Debt Collection Agencies vs. Scammers

Be very careful if you are ever contacted by someone who claims to be from a debt collection agency. Some scammers are known to masquerade as debt collectors. Never rush to make payments to any debt collector if you don’t recognize the debt they’re trying to collect. If you suspect you’re being scammed, ask for a company name and contact number. Then check with your original creditor to see if they have assigned the debt to a collection agency.

Reputable debt collection agencies will send letters to the address you gave your creditors. If there’s a way to see that you’ve moved, agencies can send letters to your new address in an attempt to collect a debt. Whether agencies send you letters or call, they’re required to give you specific details about your debt, including:

• The name of the original creditor.
• The amount you owe (including late fees and other charges).
• Your ability to dispute the debt in question, along with any stipulations.

The collector must also inform you that you have 30 days to dispute the debt in writing. They need to tell you the name and address of the original creditor if you request it. If you don’t dispute the debt within 30 days, the agency will consider your debt valid, and they can contact you to collect the amount owed.

Companies that follow the rules will work within the statute of limitations, based on the type of debt you owe and the state you live in. They will contact you only between 8am and 9pm, although you might get many calls in one day.

When collections agencies operate the right way you should not experience any harassment or threats. It is important to know, if a company threatens you with a police arrest, or if they tell you that someone is coming after you, then they are not acting lawfully.

How Does Collections Affect Your Credit Score?

If you have an unpaid debt in collections, your creditor can report it to credit bureaus, which can cause a major blow to your credit score. It is hard to predict exactly how much a credit note will impact a credit score because credit scores are unique and determined using a number of factors. However, a debt in collections is one of the most serious negative items that can appear on credit reports. That’s why working hard to get current before an account enters collections could help your credit recover faster.

How Long Do Collections Stay on Your Credit Report?

Generally, an account in collection will remain on your credit reports for seven years from the first delinquent date. If it hasn’t fallen off your credit report after that time, you can file a dispute with the credit bureau in question and have it removed. However, just because a debt in collections eventually gets removed from your credit score, does not mean you should ignore it or not pay it. You risk adversely impacting your credit score which could lead to being sued by the collector if you don’t pay your debt. Few experts would recommend ignoring your debt in collections. You’re always far better off negotiating a settlement plan if available.

Do Collections Ever Go Away?

Collections don’t usually just go away. However, there is a limited amount of time that debt collectors can sue you to collect on a debt. This is called the “statute of limitations” and it usually starts when you first fail to pay your debt. When the statute of limitations runs out, your unpaid debt becomes “time-barred” and a debt collector can no longer sue you to collect it.

How long does the statute of limitations last? It depends on what kind of debt it is and the law in your state — or the state specified in your credit contract or agreement creating the debt. Some states will also reset the clock and begin a new statute of limitations period if you ever make a payment or acknowledge the debt in writing.

What To Do If a Bill Goes to Collections

Once you are notified that your debt has entered into collections, there are three things you should do to begin getting out of collections:

1. Confirm that the debt is yours. Before you pay anything, debt collection agencies are required by the Fair Debt Collection Practices Act (FDCPA) to send you a debt validation letter. This is an important step because it confirms if the debt belongs to you. The letter will also list how much is owed, the type of debt owed and details about the creditor. If there are any errors, you have 30 days to dispute the debt.
2. Consider your payment options. You’ll typically have two repayment options. Either you will pay off your debt in a lump sum or according to a repayment plan. The option you choose will depend on your budget and the amount of debt owed.
3. Begin making payments. Be sure to ask your debt collector for a written agreement before making a payment. Review the agreement carefully for accuracy and then start making payments. Make sure the collector confirms receipt of your payment and documents every single payment you make for your future records.

Don’t Forget You Have Rights in Debt Collection

A federal law known as the Fair Debt Collection Practices Act gives you rights and protection when it comes to how companies can conduct debt collection. The act protects consumers from “abusive, deceptive and unfair debt collection practices”. It limits debt collection calls before evening hours. It disallows incessant calling or communication via postcard and it prohibits the use of violence or intimidating language from the debt collector.

Remember you have the right to stop the debt collectors from contacting you if you’re being harassed for a debt that doesn’t belong to you. To stop the contact, you need to go through the same steps as if the debt was yours. Ask the collector to verify the debt, and then dispute it in writing. If the collector continues you are entitled to send a cease and desist letter, and then file complaints with the FTC.

What Happens If You Don’t Pay Collections

Ignoring and not paying debt collectors can lead to serious consequences. It is something you shouldn’t do when getting out of debt. The collection process typically becomes more aggressive the more you ignore it. Debt collectors can sue you if you ignore their calls and letters. They may win by default if you ignore the lawsuit. In that case, you may end up paying the debt as well as the collector’s attorney and collection fees. The debt collector can collect on this judgment by garnishing your wages or by placing a lien on any property you own.

Your credit score will also suffer greatly if you do not pay your debts. Unpaid debt can negatively impact your credit score for up to seven years, even if debt collectors stop contacting you. 

The Bottom Line on Debt Collections

Collections are a legal way for creditors and debt collection agencies to collect money that is owed to them. You owe it to companies to pay back your debts. Otherwise, you could face a barrage of calls and letters from debt collectors trying to collect a debt.

But even if you owe money, you still have rights. You are protected against deceptive or abusive behavior. There are actions you can take if someone is harassing you to collect a debt. For example, you can file a complaint with federal agencies or your state attorney.

The information provided on this website does not, and is not intended to, constitute legal, financial, or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal, financial, tax or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; Avant does not recommend or endorse the contents of the third-party sites.

222 W Merchandise Mart Plaza, Suite 900, Chicago, IL 60654

Avant branded credit products are issued by WebBank.

Connecticut consumers: all marketing efforts are associated with Avant, LLC, Small Loan Company License #SLC-1246731

Avant of Washington, LLC DBA Avant is a wholly-owned and operated subsidiary of Avant, LLC Nationwide Multistate Licensing System #1440089.

Avant, LLC Nationwide Multistate Licensing System #1243761.

THIS IS A LOAN SOLICITATION ONLY. AVANT, LLC IS NOT THE LENDER. INFORMATION RECEIVED WILL BE SHARED WITH ONE OR MORE THIRD PARTIES IN CONNECTION WITH YOUR LOAN INQUIRY. THE LENDER MAY NOT BE SUBJECT TO ALL VERMONT LENDING LAWS. THE LENDER MAY BE SUBJECT TO FEDERAL LENDING LAWS.

The post What Happens When Debt Goes to Collections? appeared first on The Avant Blog.

Frequently asked questions about personal loan payments

What is the difference between APR and interest rate?

You’ll see both an Annual Percentage Rate (“APR”) and an annual interest rate in your loan agreement when applying through Avant. Both are the cost of borrowing the money. While they are related terms, there’s a difference between an APR and an interest rate.

The interest rate is the percentage of the principal loan amount you are charged for borrowing the money, while the APR is the interest rate plus any additional administration or origination fees that cover the expenses the lender has for processing the loan. The APR is calculated as the percentage of the amount disbursed after any fee. Because the additional fees are factored into the APR, the APR is always a higher number than the interest rate.

How are personal loan payments calculated?

While Avant’s personal loan monthly payment calculator does the work for you, it can be helpful to understand how your payments are calculated.

For personal loans with fixed rates, like those through Avant, your monthly payment is calculated using three things.

1. Total amount you borrow: This is easy. It’s simply the amount of your loan.
2. Your APR. This is also simple as Avant loan agreements clearly indicate your APR.
3. Number of total loan payments: To determine this, multiply your 12 monthly payments by the number of years you will make those payments. So, if you have a two-year loan, you would make 24 total payments.

It is important to keep in mind that Avant calculates APR on a daily accrual rather than a monthly accrual. The daily interest amount is calculated using the outstanding principal balance as of the beginning of a month and then the monthly interest payment is derived by adding the daily interest amount. Monthly interest payment can vary depending on the number of days in a month. For example, February (28 days) has fewer days when compared to January (31 days) and therefore would have a lower monthly interest payment. However, your total monthly loan payment remains the same amount every month. A portion of monthly payment will be applied towards the interest balance which equals the total daily accrued interest in that month and the rest is applied towards the principal balance. The distribution of that payment to interest and principal varies from month over month. In the initial months, the proportion of interest is higher in the monthly payment while in the later months the proportion of principal is higher.

Take, for example, a $20,000 personal loan at 15% APR that accrues daily for one year. The daily interest rate can be calculated by dividing the 15 (APR) by 365 (days in a year). This calculates a daily interest rate of 0.04%.

Looking at the bigger picture, we can calculate how monthly personal loan payments are calculated.

• $20,000 (loan) x 0.04% (daily interest rate) = $8.22 (daily accrued interest)
• $8.22 * 31 = $254.79 (First Month Interest)
• Second month’s interest will be $212.30 (a lower amount than first month because the principal balance has reduced in the second month)
• Total Interest Payment on a one year loan = $1654.42
• After year 1, the outstanding loan balance becomes 0.
• $20,000 (loan) + $1654.42 (total yearly interest) = $21,654.42 (total amount due)
• $21,654 (total amount due) ÷ 12 (months) = $1,804 (total monthly payment)

Unless math is your strong suit, this formula can be complex. If you’re ever unsure of your math, double-check it using the steps above.

Is there a difference between a personal loan and installment loan?

An installment loan is a type of personal loan that’s repaid with regularly scheduled payments (often fixed). All personal installment loans through Avant offer the convenience of fixed interest rates, so your monthly payments will never change.

Some lenders offer personal loans with variable interest rates. That means that the interest rate fluctuates over time depending on the current market interest rate. They’re harder to budget for, as you won’t know what your payment will be until you receive that month’s statement.

How does credit score affect my personal loan rates?

The credit score you have when you apply for a personal loan through Avant will influence the interest rate and monthly payments set for your loan. If you have a high score, you could receive a lower interest rate on your personal loan and therefore a lower monthly payment.

How do you calculate monthly interest on a personal loan?

You’ll make monthly payments on your loan, so you may be interested in understanding how much interest you will pay during any given month.

Take the annual percentage rate (APR) on your loan and divide that number by 365 to see the percentage of interest charged on a daily basis. Then, multiply that sum by the principal balance of your loan. The result will indicate how much interest you will pay on a daily basis for that loan balance. From there, multiply that amount by the number of days in that month, and you will see the amount of interest you will pay for that month’s loan payment.

For example, if your principal balance on your loan is $20,000 and your APR is 15%, you will pay $8.22 in interest per day. If that loan payment is due in January, which has 31 days, January’s loan payment will include $254.79 in interest with the rest going toward principal. If the monthly payment on this loan is $1805.17, then $254.79 will be applied towards Interest and rest $1550.38 will be applied towards principal. The Principal balance outstanding at the beginning of next month will then become $18,449.62 ($20,000 – $1550.38). For the month of February, the daily interest will be calculated by multiplying daily APR by outstanding amount at the beginning of February (.04%*$18,449.62) . The daily interest amount will then be multiplied by 28 days in February to get February Interest amount of $212.30

The calculation will look like this:

Divide your APR by 365:  0.15 ÷ 365 = 0.04%

Multiply that sum by the loan balance:   0.04% x $5000 = $8

Multiple that sum by the number of days for January:  $8 x 31 = $248

Multiple that sum by the number of days for February:  $7.58 x 28 = $212

While your payment on a fixed-rate personal loan will remain the same each month, as you pay down your loan, you will pay less interest. Your total monthly loan amount remains the same, but the distribution of that payment to interest and principal changes.

Additionally, Avant includes an origination fee for personal loans that is calculated into the APR. While the interest rate is the percentage of interest paid on a loan, the APR includes the interest rate, as well as other fees and expenses (such as the origination fee.)

Learn more about personal loans through Avant

Personal loans through Avant cater to many needs, including emergencies, debt consolidation, and home improvement. Use the Avant personal loan payment calculator to get an idea of loan amounts and repayment terms that fit your needs, then apply online with our easy process. With fixed payments, fast decisions and funding, and simple autopay options, you’ll have the peace of mind to enjoy what matters most. It’s the Avant way.

The information provided on this website does not, and is not intended to, constitute legal, financial, or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal, financial, tax or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; Avant does not recommend or endorse the contents of the third-party sites.

222 W Merchandise Mart Plaza, Suite 900, Chicago, IL 60654

Avant branded credit products are issued by WebBank.

Avant, LLC is a financial technology company, not a bank. Banking services are provided by Evolve Bank & Trust, Member FDIC.

*Avant loan amounts range from $2,000 to $35,000. APR ranges from 9.95% to 35.99%. Loan lengths range from 12 to 60 months. Administration fee up to 4.75%.

* If approved the actual loan amount, term, and APR amount of loan that a customer qualifies for may vary based on credit determination and state law. Minimum loan amounts vary by state.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.

†The decision process may take longer if additional documents are requested. Approval and loan terms will vary based on credit determination and state law.

‡ Funds from Avant are generally deposited via ACH for delivery next business day after approval if approved by 4:30pm CT Monday-Friday.

Avant of Washington, LLC DBA Avant is a wholly-owned and operated subsidiary of Avant, LLC Nationwide Multistate Licensing System #1440089.

Avant, LLC Nationwide Multistate Licensing System #1243761.

Connecticut consumers: all marketing efforts are associated with Avant of Connecticut, LLC d/b/a “Avant”, Small Loan Company License #SLC-1457409

THIS IS A LOAN SOLICITATION ONLY. AVANT, LLC IS NOT THE LENDER. INFORMATION RECEIVED WILL BE SHARED WITH ONE OR MORE THIRD PARTIES IN CONNECTION WITH YOUR LOAN INQUIRY. THE LENDER MAY NOT BE SUBJECT TO ALL VERMONT LENDING LAWS. THE LENDER MAY BE SUBJECT TO FEDERAL LENDING LAWS.

The post Personal Loan Calculator appeared first on The Avant Blog.

Determining which type of personal loan is best for your situation can be a big decision. To help, we’ve compiled a “cheat-sheet” explaining the types of personal loans available so you can make the best choice for your financial journey. 

What is a Personal Loan?

You may be asking, what is considered to be a personal loan? A personal loan is a loan that allows you to borrow money to cover a variety of uses. Some examples may include a car repair, emergency medical expense, or a home improvement project. These loans have a short to moderate-term repayment period and you can typically get the funds quickly.‡ There are two main types of personal loans, secured and unsecured loans. 

What is a Secured Loan?

Secured loans require some sort of backing by collateral, which can be seized, or taken, by the lender if you do not repay the loan. Some examples of collateral can include a house, car, or boat. Some lenders allow borrowers to secure these loans with a personal savings account or other valuable asset. Typically, secured loan rates are lower than unsecured because they are considered less risky for lenders. 

What is an Unsecured Personal Loan?

Unsecured personal loans, on the other hand, do not need to be backed by collateral. These loans typically have a higher annual percentage rate, or APR, since they are riskier for lenders to offer. 

When it comes to unsecured personal loans, factors like the borrower’s credit score help to determine the amount they can borrow and the repayment rate. The better your credit score, the lower your rate will typically be. It is still possible to get an unsecured loan with a less than ideal credit score.

There are a number of unsecured personal loan options offered through Avant.

What is a Fixed-Rate Loan?

Fixed rate loans are a type of loan where the interest rate does not change during the period of the loan. This helps the borrower to budget better and can be ideal for those looking for a consistent payment each month. Many personal loans offer fixed rates but be sure to verify the terms of the loan with your lender.

There are a few different unsecured personal loan options, including Home Improvement Loans, offered through Avant. 

What is a Variable Loan?

Variable-rate loans, on the other hand, don’t have a fixed interest rate. The rate on the loan fluctuates during the life of the loan. This is because it is tied to a benchmark rate that is set by your lender. When this benchmark rate changes, the rate on your loan, as well as your monthly payments and total interest, can increase or decrease. While the constant change in rates may seem like a drawback, the benefit to variable-rate loans is that they typically carry lower APRs versus fixed-rate loans. Lenders may also cap how much your rate can change over a period of time and life of the loan.

If you are looking for a loan with a short repayment term, a variable-rate loan may make sense since rates may not surge in the short-term.   

What is a Debt Consolidation Loan?

If you carry multiple debts, one option is to use a loan to consolidate everything into one simple monthly payment. A debt consolidation loan can be easier to manage and pay off over time. These types of loans are typically unsecured personal loans. An advantage of a debt consolidation loan is you can use it to pay off credit cards, which can increase your credit utilization score.

However, one thing to consider with debt consolidation loans is that you will free-up your credit line on your credit card. Be sure to keep your credit card spending in check to avoid adding more debt to your plate!

What is an Installment Loan?

Installment loans are a type of loan where you borrow a set amount of money and then repay the loan over a fixed number of payments, or installments. When a borrower pays these installments, they repay a portion of the principal amount borrowed and a portion of the interest on the loan. Typically, the installment amount remains the same throughout the loan term. The advantage of installment loans includes more flexible terms and a lower interest rate, but check with your lender for the full terms. Examples of installment loans include auto loans, personal loans, and student loans.

Checking your personal loan options does not impact your credit score.

Check Your Loan Options or Redeem Your Mail Offer.

The information provided on this website does not, and is not intended to, constitute legal, financial, or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal, financial, tax or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; Avant does not recommend or endorse the contents of the third-party sites.

222 N. LaSalle St., Suite 1600, Chicago, IL 60601

Avant branded credit products are issued by WebBank.

Avant, LLC is a financial technology company, not a bank. Banking services are provided by Evolve Bank & Trust, Member FDIC.

*Avant loan amounts range from $2,000 to $35,000. APR ranges from 9.95% to 35.99%. Loan lengths range from 12 to 60 months. Administration fee up to 4.75%.

* If approved the actual loan amount, term, and APR amount of loan that a customer qualifies for may vary based on credit determination and state law. Minimum loan amounts vary by state.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.

†The decision process may take longer if additional documents are requested. Approval and loan terms will vary based on credit determination and state law.

‡ Funds from Avant are generally deposited via ACH for delivery next business day after approval if approved by 4:30pm CT Monday-Friday.

Avant of Washington, LLC DBA Avant is a wholly-owned and operated subsidiary of Avant, LLC Nationwide Multistate Licensing System #1440089.

Avant, LLC Nationwide Multistate Licensing System #1243761.

Connecticut consumers: all marketing efforts are associated with Avant of Connecticut, LLC d/b/a “Avant”, Small Loan Company License #SLC-1457409

THIS IS A LOAN SOLICITATION ONLY. AVANT, LLC IS NOT THE LENDER. INFORMATION RECEIVED WILL BE SHARED WITH ONE OR MORE THIRD PARTIES IN CONNECTION WITH YOUR LOAN INQUIRY. THE LENDER MAY NOT BE SUBJECT TO ALL VERMONT LENDING LAWS. THE LENDER MAY BE SUBJECT TO FEDERAL LENDING LAWS.

The post Types of Personal Loans appeared first on The Avant Blog.

When you apply for a personal loan, the lender typically reports it to the major credit reporting agencies. That means it shows up on your credit report, and may slightly lower your credit score for a short time. Here’s what else you should know about how a personal loan may affect your credit score.

How Do Personal Loans Hurt Your Credit Score?

A personal loan is debt. How you manage that debt, and the amount of debt you have, impacts your credit score. Here’s how a personal loan can hurt your credit score.

It Triggers a Hard Inquiry On Your Credit Report

When you apply for a personal loan, the lender will run a credit check on you and that inquiry will show up on your credit report. A new inquiry can temporarily lower your credit score, but as long as you consistently pay your bills on time, your score may rebound quickly. 

Curious to know what your personal loan options may be with Avant? You can check your eligibility without affecting your credit score.

It Increases Your Debt

When you take out a personal loan, you add to the amount of debt you owe. This may impact your credit score if the new loan has a high balance and if you have other high balances on other credit accounts. Since your debt-to-available-credit ratio makes up a good chunk of your FICO credit score, paying down the amount you owe can help to boost your score over time. 

Missed Payments May Affect Your Credit

If your payment on your personal loan is 30 days or more past due, your lender will likely report that to the credit reporting bureaus, which could significantly lower your credit score. That late payment could also stay on your credit report for seven or more years. Setting up some simple strategies can help you stay on top of loan payments.

Paying Off a Loan May Impact Your Credit Score

Taking out a personal loan and managing repayments promptly shows you can manage different types of debt (like credit cards and personal loans) over time. However, when you pay off your personal loan, you may change that credit mix, particularly if your account closes once you pay off the loan. That, in turn, may impact your credit score.¹

¹Experian – Paying off a Personal Loan Early

Check Your Avant Loan Options

Checking your personal loan options does not impact your credit score.

How Do Personal Loans Build Your Credit?

Personal loans may positively impact your credit history and have the potential to boost your score when used the right way. Here are some ways a personal loan can help build positive credit history:

You Get Points for On-time Payments

Each month when you pay your loan on time, you show responsibility in handling debt. Making on-time payments is the easiest way to build a positive credit history. It’s also important: Your payment history makes up 35% of your FICO score, so paying on time is a critical component of your credit score calculation.

You Improve Your Credit Mix

A personal loan is an installment loan, which is different from a credit card. While a credit card is a type of revolving credit, a personal loan is a type of non-revolving credit. A non-revolving line of credit is a one time arrangement where the account is closed once the credit line is paid off. Revolving credit, on the other hand, remains open until the lender or borrower closes the account. Taking out a personal loan and managing your payments well shows you can manage a mix of different types of credit.

You May Lower Your Credit Utilization Ratio

When you have credit cards, your credit report includes your credit utilization ratio – the amount of credit you are using, measured against the total amount of credit available to you. The lower your credit utilization ratio, the better. So, if you have a total credit limit of $2,000 between all your credit cards and you have balances totaling $1,000, you’re utilizing 50% of your credit. According to Experian.com, it is recommended that you keep your total credit utilization rate below 30%.

Consolidating debt by taking out a personal loan to pay down or pay off your credit card balances can help to lower your credit utilization ratio. You consolidate multiple debts into one and only have to worry about one monthly payment. However, if you decide to go this route, it’s important to make your payments on time.

How Much Does a Loan Affect Your Credit Score?

According to data from Transunion, consumers pay down just over 58% of their credit card debt with new debt consolidation loans. More than 60% of consumers who consolidated their credit card debt saw their balances decline by 60% or more from pre-consolidation levels. The resulting drop in credit line utilization, together with other factors, led to a boost in credit scores for the majority of consumers who employed a debt consolidation loan.

Following consolidation, 68% of consumers saw their credit scores improve by more than 20 points. What’s more, while the initial score boosts were apparent after just one quarter, score improvements persisted a year later (albeit at lower levels).

Source materials for this data can be found from the following resources:

• TransUnion Debt Consolidation Study
• MyFICO Credit Damage Data
• MyFICO

Learn More About Avant Personal Loans

Learn more about how to secure a personal loan through Avant. You can apply online from anywhere and checking your personal loan options does not impact your credit score. 

The information provided on this website does not, and is not intended to, constitute legal, financial, or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal, financial, tax or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; Avant does not recommend or endorse the contents of the third-party sites.

Avant branded credit products are issued by WebBank.

Avant, LLC is a financial technology company, not a bank. 

* Loan amounts range from $2,000 to $35,000. APR ranges from 9.95% to 35.99%. Loan lengths range from 12 to 60 months. Administration fee up to 4.75%.

* If approved the actual loan amount, term, and APR amount of loan that a customer qualifies for may vary based on credit determination and state law. Minimum loan amounts vary by state.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.

†The decision process may take longer if additional documents are requested. Approval and loan terms will vary based on credit determination and state law.

‡ Funds are generally deposited via ACH for delivery next business day after approval if approved by 4:30pm CT Monday-Friday.

Avant of Washington, LLC DBA Avant is a wholly-owned and operated subsidiary of Avant, LLC Nationwide Multistate Licensing System #1440089.

Avant, LLC Nationwide Multistate Licensing System #1243761.

Connecticut consumers: all marketing efforts are associated with Avant of Connecticut, LLC d/b/a “Avant”, Small Loan Company License #SLC-1457409

THIS IS A LOAN SOLICITATION ONLY. AVANT, LLC IS NOT THE LENDER. INFORMATION RECEIVED WILL BE SHARED WITH ONE OR MORE THIRD PARTIES IN CONNECTION WITH YOUR LOAN INQUIRY. THE LENDER MAY NOT BE SUBJECT TO ALL VERMONT LENDING LAWS. THE LENDER MAY BE SUBJECT TO FEDERAL LENDING LAWS.

The post How Does a Personal Loan Affect Your Credit Score? appeared first on The Avant Blog.

Applying for a personal loan is a big decision. You need to consider all the factors that go into taking on a loan, including your financial situation, how you plan to pay it off, and the lender you decide to use. Here are eight simple steps to help you confidently apply for a loan.

8 Steps to Apply for a Personal Loan

A personal loan can help you manage emergencies like unexpected hospital bills or car repairs. If you’re confident a personal loan is the right type of financing for you,  these eight steps can help to keep your application process on track.

1. Check the numbers.
2. Run your own credit check.
3. Explore your possibilities.
4. Choose the best loan for your situation.
5. Comparison shop personal loan rates.
6. Decide on a lender and apply.
7. Gather and provide necessary documentation.
8. Accept the loan and begin making payments.

1. Check the numbers

Before taking out a personal loan, you want to ensure you can afford to pay back the amount you plan to borrow. Lenders will typically do their due diligence to make sure you have the ability to repay the debt, but it’s smart to also do your own math. 

Begin by figuring out exactly how much money you’ll need. Remember that some lenders assess an origination fee and can deduct that from your loan proceeds so make sure you’ll still have enough left over after the fee to cover your expense. 

The loan origination fee covers the cost of processing a loan. The loan origination fees are usually a percentage of the amount loaned. 

It’s also wise to use a personal loan calculator to figure out what your monthly payment will be. This can be a little tricky if you aren’t up to speed on what kinds of rates and repayment terms lenders will offer. However, play around with the numbers to get a good idea of what the loan will cost you. From there, you  can decide if your budget can handle the loan amount.  

2. Run your own credit check

Your credit score helps lenders determine your creditworthiness and how likely you are to repay your loan; the higher your score, the better chance you have of being approved for a competitive interest rate.

Running your own credit check will give you a good idea of where you stand before you apply. You can request a copy of your credit report at AnnualCreditReport.com. All three credit bureaus (Equifax, TransUnion, and Experian) will provide you with a free copy of your credit report every 12 months. Carefully examine your credit report for errors, and if you find any, contact the main credit reporting agencies right away to dispute them.

If your credit score is low, there may be other reasons, however there are steps you can take to improve your credit before applying.

3. Explore your possibilities

Your creditworthiness may require you to have a cosigner in order to to qualify for a personal loan. You may also carefully consider your choice of lender. People with a lower credit score may find it difficult getting approved at traditional banks. However, some online lenders specialize in helping borrowers with less-than-perfect credit. Some credit unions also have short term loans that serve as less expensive alternatives to payday loans.

Remember: It may be worth taking the time to strengthen your credit if you don’t meet the typical requirements and your expense isn’t urgent. You can also reach out to a family member or friend with good financial health about being your co-signer.

4. Choose the best loan for your situation

Now, armed with all the right knowledge, you may be ready to consider which type of loan best fits your situation. Do you go with a lender that will only approve loans for specific purposes or do you choose a lender that may not limit what you can do with the funds?

Whatever you decide, make sure you find a lender that is comfortable loaning you money for the reason you need it. For example, one lender may not allow you to use borrowed funds for business purposes, while another might let you borrow money to fund your small business.

A variety of different loans are offered through lenders, such as: 

• Debt consolidation loans: You decrease the number of payments you have to worry about each month and receive one (potentially lower) interest rate when you take out one loan to cover your existing debt. A very common use for personal loans.
• Home improvement loans: Use a home improvement loan to pay for a large renovation up front without talking out a secured home equity loan. 
• Medical loans: Medical expenses are often unpredictable. Use a personal loan to alleviate the immediate financial burden and pay down debt over a number of years.
• Emergency loans: Emergency loans can be useful in a variety of situations. Some examples may include, a car breakdown, your water heater breaks, or a smaller medical expense may be good reasons to take out a personal loan.

5. Comparison shop loan rates

Whatever you do, when personal loan shopping, do not simply settle on the first offer you receive. Shop around for the best possible interest rate and compare several types of lenders and loan types to get an idea of what you qualify for.

Personal loan offers are typically available from banks, credit unions, and online lenders. If you’re a long time account holder in good standing with your bank or credit union, check there first. A bank or credit union may be willing to overlook recent credit missteps or give you a better rate when they see a history of positive financial choices made over the years.

Some online lenders pre qualify you with a soft credit check. This typically doesn’t impact your credit score. Check to see if the lenders you are considering offer a pre-qualification process. This will help provide a full understanding of the rates available to you.

Lenders that don’t offer a pre-qualification process typically run hard credit inquiries as part of the loan application process. Too many hard inquiries may negatively impact your credit score. 

6. Decide on a lender and apply

You’ve done your research. Now it’s time to pick the lender with the best offer for your needs and start the application process. Each lender treats the application process slightly differently. With some, you may be able to do the entire application process online. The local branch of your bank or credit union may require you to apply in person.

Lenders also require different information on their respective applications. That said, you can typically expect to provide your name, address, Social Security Number, and contact information. 

7. Gather and provide necessary information

Even after you’ve submitted your application, your lender will likely ask you to provide additional documentation. Every lender has their own set of requirements. For example, you might need to upload or fax a copy of your latest pay stub, a copy of your driver’s license, or proof of residence.

The lender will tell you what documents they require, if any, and how you can get it to the right person. Remember, the faster you provide the information, the quicker you’ll receive a decision. 

8. Accept the loan and begin making payments

When the lender notifies you that you’ve been approved, you will need to finalize the loan documents and accept the terms. You can typically expect to get the loan funds within a week – however some online lending platforms, like Avant, may get the money to you as soon as the next business day after you’re approved‡ 

Start keeping track of when your payments are due. Consider setting up automatic payments from your bank account. Some lenders may give you interest rate discounts if you set up your account to make auto-payments.

Loan Application FAQs

Am I eligible for a personal loan?

Lenders will take multiple factors into account when determining your creditworthiness. Lenders also use a credit score to determine the risk associated with providing you with a loan. Some factors lenders may consider determining creditworthiness include:

• Income.
• How long you’ve lived at your current address.
• Employment stability.
• Outstanding debt.

What credit score do you need to get a personal loan?

What credit score you need depends on how much you want to borrow and where you want to borrow from. Different lenders have different criteria. Having poor credit doesn’t necessarily mean you can’t get a personal loan. For example, while most Avant customers have credit scores between 600 and 700***, you may qualify for a loan through Avant with a minimum credit score of 580. You can check your personal loan options easily online.

How can I take out a loan with no credit?

Taking out a loan with no credit may cost you more, but is certainly not impossible. Here are some options to consider if you’re looking for a no-credit loan:

1. No-credit-check loans
2. Payday alternative loans
3. Possibly having a co-signer
4. Apply for a secured credit card
5. Apply for a credit-builder loan
6. Apply for a secured loan

What disqualifies you from getting a personal loan?

Your loan may be denied by any lender for a number of reasons.  Your credit score may be too low. Your debt-to-income ratio (DTI) could be too high. You may have also asked to borrow more money than the lender thinks you can repay based on factors such as income, employment stability and other outstanding debts.

Do you need collateral for a personal loan?

Personal loans are typically unsecured. They don’t require collateral. That said, some lenders require some personal loans to be backed by something that holds monetary value. Examples of collateral on a secured personal loan can include things like cash in a savings account, a car, or perhaps a home.

Apply For a Personal Loan Through Avant

Fast and easy to understand. Personal loans through Avant may help customers pay bills, improve their homes, cover emergencies, and more – all while demonstrating responsible credit use. Apply for a personal loan through Avant today.

The information provided on this website does not, and is not intended to, constitute legal, financial, or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal, financial, tax or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; Avant does not recommend or endorse the contents of the third-party sites.

Avant branded credit products are issued by WebBank.

Avant, LLC is a financial technology company, not a bank.

* Loan amounts range from $2,000 to $35,000. APR ranges from 9.95% to 35.99%. Loan lengths range from 12 to 60 months. Administration fee up to 4.75%.

* If approved the actual loan amount, term, and APR amount of loan that a customer qualifies for may vary based on credit determination and state law. Minimum loan amounts vary by state.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.

*** Average FICO score of Avant customers accurate as of October 11, 2022.

†The decision process may take longer if additional documents are requested. Approval and loan terms will vary based on credit determination and state law.

‡ Funds are generally deposited via ACH for delivery next business day after approval if approved by 4:30pm CT Monday-Friday.

Avant of Washington, LLC DBA Avant is a wholly-owned and operated subsidiary of Avant, LLC Nationwide Multistate Licensing System #1440089.

Avant, LLC Nationwide Multistate Licensing System #1243761.

Connecticut consumers: all marketing efforts are associated with Avant of Connecticut, LLC d/b/a “Avant”, Small Loan Company License #SLC-1457409

THIS IS A LOAN SOLICITATION ONLY. AVANT, LLC IS NOT THE LENDER. INFORMATION RECEIVED WILL BE SHARED WITH ONE OR MORE THIRD PARTIES IN CONNECTION WITH YOUR LOAN INQUIRY. THE LENDER MAY NOT BE SUBJECT TO ALL VERMONT LENDING LAWS. THE LENDER MAY BE SUBJECT TO FEDERAL LENDING LAWS.

The post How to Get a Personal Loan appeared first on The Avant Blog.

#1: You have the power to adjust loan payments.

That’s right. We believe that your loan should fit your lifestyle. With a 10-day grace period, we give you the flexibility to make a later payment without incurring a late fee. That way, if something unexpected happens you don’t have to worry about missing a payment. Log on to your Avant dashboard or call 1-800-712-5407 to request a payment change.

#2: Set automatic payments and take one more thing off your plate. 

Enrolling in automatic payments is a great way to eliminate the time and stress of making payments entirely. Do away with the clutter of stamps and checkbooks by choosing ACH autopay. With autopay, all you need to do is make sure there are sufficient funds in your bank account to cover that month’s installment. To enroll in ACH autopay, call 1-800-712-5407.

And, if you download the Avant app from the Apple App Store or the Google Play Store, you can get friendly push notifications straight to your phone to help you stay on track.

#3: Call us if you run into trouble.

We know that life can sometimes throw the unexpected at you, so we aim to provide you with the most flexibility possible in managing your loan. If something comes up and you’re unable to make a payment on time, there may be options available that can help. If you’re having problems managing your loan, give us a call. 

Avant’s mission is to offer access to responsible financial products to every customer, so we want you to know we’ll help you figure it out and get you back on track.

The post 3 Things You Need to Know About Paying Off Your Personal Loan appeared first on The Avant Blog.

Remind Yourself

The first step toward a worry-free loan is knowing when your monthly installments are due. Do yourself the favor of taking care of all the reminders that you’ll need up front. That way, you’ll know exactly what’s expected of you. 

Setting up reminders is an effective way to prompt you to make your payments, or may prompt you to remember specific details or dates even if you forget farther down the road. With just a few quick steps on your phone or computer, you’ll be able to stay ahead of the curve with each installment. 

Set up alerts on your phone a few days or up to a week in advance so that you can ensure you make payments on time. If you use a calendar or planner, make sure to write down installments and other important dates. The best part about reminders is that they’re simple and typically take only a few minutes to set up.

Payment Methods

To help make repaying your loan as simple as possible, you can choose to enroll in automatic payments via Automated Clearing House (ACH). Setting up automatic payments at the outset of your loan is a worry-free way to take stress off your plate. 

In addition, you can arrange to pay by other accepted methods such as paper check, cashier’s check, or money order. Whatever your preferred payment method, be sure to set up reminders and give yourself enough time to make payments each month. 

Avoid Overdrafts

Check your account to make sure you always have enough funds to cover your loan payments, as well as any other payments you may have. Keep track of when your payment is applied to your account so that you know exactly what funds you have available. Log on to your Avant dashboard to see your payment options.

Don’t pay your loan off in the dark. Staying in control of how and when you pay off your loan is easier than ever. Here are 3 things you need to know about paying off your loan through Avant.

The post Starting Your Loan Down the Right Path appeared first on The Avant Blog.

In essence, the APR for a mortgage includes all costs you pay (including origination fees, interest, etc.) so that you have an idea of how much you’re paying on a yearly basis to own the house. This is different from the interest rate, which only tells you how much interest you must pay on the principal each month – but doesn’t include fees.

For example, if your mortgage loan is for $300,000 and you pay $8,000 in costs and fees associated with getting the loan, then the $8,000 is calculated in your APR. Since your interest rate does not reflect those extra costs, it’s important to pay attention to your APR because it will tell you how much you’re paying in total – including the extra costs. It’s also important to note that some lenders offer increased rates in exchange for reduced closing costs, or the option to pay for discount points to reduce your rate.

The post What Does APR Mean When Buying a Home? appeared first on The Avant Blog.

Typically, APR on an auto loan works similarly to APR on an unsecured loan, where simple interest accrues daily based on the outstanding principal balance; as you pay down your principal balance, the amount of interest accrued each day decreases. Just remember that everything is negotiable when it comes to buying a car, including the APR.

When you are going over the financing options with the dealership, they may try to add 2-3% onto your APR beyond what’s necessary, and that extra amount will go directly to them, so you should always do research beforehand and be prepared to show them competitive rates from your local bank or credit union to prevent them from jacking up your APR. Be ready to back up your promise to get a loan from the bank instead of the dealership if they don’t make a fair offer.

Find out what 0% APR means in the context of buying a car here.

The post What Does APR Mean When Buying a Car? appeared first on The Avant Blog.

What does APR stand for with credit cards?

APR stands for Annual Percentage Rate, and for credit cards, APR is the standardized way to express the card’s interest rate. It refers to the yearly cost of borrowing an amount of money. With many credit cards, including the one through Avant, you’ll only be charged interest if you don’t pay off your full balance by the due date.

How does credit card interest work?

When you buy something on a credit card, you’re borrowing money to pay for it. If you don’t pay off that purchase by the next billing cycle, interest begins accruing. The APR represents the rate of interest charged on that remaining balance.

Types of credit card APRs.

There are different types of credit card APRs that are applied in specific situations. Understanding them can help you use your Avant Credit Card strategically and responsibly to avoid incurring interest charges. 

Types of credit card APRs include:

• Purchase APR: This is the standard APR for purchases on your credit card. It kicks in if you have a balance that carries over to the next month.
  
• Introductory APR: Introductory APR is usually part of a promotional offer for new cardholders. It may refer to a low APR rate for the first several billing cycles, or it may refer to 0% APR for the first several billing cycles. Because it is an introductory rate, you’ll need to pay off your balance before the intro period ends, or your balance will be charged the card’s standard APR. The Avant Credit Card currently does not include an introductory APR.*
• Cash Advance APR: A cash advance is when you withdraw money using your credit card, such as from an ATM, or use your credit card to purchase items that can be converted to money, such as money orders. Cash advances generally begin accruing interest immediately, and they may have fees and a higher APR than the purchase APR. Some cards may charge a cash advance fee, in addition to the Cash Advance APR, for the use of this feature.
  
• Balance Transfer APR: This APR takes effect when you transfer a debt (such as a small loan or separate credit card balance) to your credit card. Interest begins accruing on the date of the debt transfer, and other fees may be charged. It may be higher than the purchase APR. The Avant Credit Card does not currently allow for balance transfers.
• Penalty APR: A penalty APR may be applied to your account if you’re late on payments, such as two months behind. It’s a higher APR than the purchase APR, and it doesn’t include any late fees that may also be charged to your account. If you make on-time payments for several months, the penalty APR often reverts back to the standard purchase APR. The Avant Credit Card does not charge penalty APRs.*
  

How is APR calculated?

APRs for credit cards can be either static (i.e., the APR does not change over time) or it may vary based on certain external factors, such as the current Prime Rate. Variable APRs are typically expressed as a combination of a variable index rate (usually the U.S. Prime Rate) and a marginal rate, which is set by the card issuer. For instance, if the U.S. Prime Rate is 3.25% and the marginal rate is 21.74%, then your APR is 24.99%. The variable rate can change periodically, which means your APR can, too.

Avant uses your average daily balance (ADB), daily periodic rate (DPR), and the number of days in the billing cycle (DBC) to calculate interest (I). 

The formula, which is also used by traditional credit card issuers, looks like this:

ADB x DPR x DBC = I

To calculate your interest, divide your APR by 365 to find your daily periodic rate. Then, calculate your average daily balance by adding each day’s balance together and dividing it by the number of days in the billing cycle.

Once you’ve got the average daily balance and daily periodic rate figured out, plug the information into the equation. If you have an average daily balance of $1,500 with a daily periodic rate of .0685% for a 28-day billing cycle, the calculation to understand how much interest you will pay for the billing cycle looks like this:

$1,500 x .0685% x 28 = $28.77

Remember that your account could have different APRs for different transactions, such as cash advances. Each transaction category with its own APR will be calculated separately, then added together to get your total interest owed. Check your statement to see which transaction types and APRs are active on your account.

Find out what 0% APR really means for credit cards here.

The calculation is based on the Average Daily Balance method used for most credit cards. If you are unsure if your products use an Average Daily Balance calculation or unsure as to the accuracy of your calculation, review your cardmember agreement and consult a professional to calculate and determine your finance charges.

What is a good APR for a credit card?

There isn’t necessarily a ‘good’ APR for credit cards, but the Federal Reserve does provide statistics on the national average credit card interest rate, which can help you gauge different offers. Bear in mind that this statistic accounts for all credit card types available, and the APR you’re eligible for is influenced by your creditworthiness. The better your credit, the better your chance of qualifying for a credit card with a low APR, which means paying less in credit card interest.

If you want to improve your credit, the following tips may help:

• Ensure your credit report is accurate: If your credit report has incorrect information on it, it could be impacting your score. Your first step should be requesting a copy of your credit report and verifying that all the information on there is true. You can go online to annualcreditreport.com to request one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies. If you see an item you disagree with – such as a loan you didn’t take out – go through the process of disputing it. Getting false items removed from your report may help your score.
• Pay down existing balances: One main factor that impacts your credit score is how much of your available credit is being used, called credit utilization. A lower level of utilization may help establish you as financially responsible with a reliable credit history.
• Resolve accounts in collections: If you have a valid account in collections, this will negatively impact your score and send up a red flag to lenders. Work with the collection agency to pay off the account or set up a payment plan. The item will still show on your report, but lenders will see you as less of a risk and newer credit-scoring systems may ignore it when calculating your score, improving it.
• Avoid opening or closing accounts: Closing accounts, like canceling a credit card, will reduce your available credit, increasing your credit utilization. Keep lines of credit open instead, using them for small purchases and paying them off in full.
  

Opening new accounts will lower your average account age, which negatively impacts your score. Opening multiple new accounts may also signal to lenders that you’re in a perilous financial situation, making them hesitant to approve you.

Learn more about the Avant Credit Card.

Understanding credit card APR, its types, and how interest is calculated can help you stay on top of your finances. With the Avant Credit Card, you can enjoy perks like a fast and easy application process and zero deposits required. Even if you have fair credit, there are credit card options offered through Avant that can work for you.

*For more information, click here to see the rates and terms associated with the AvantCard.

The post What Does APR Mean With A Credit Card? appeared first on The Avant Blog.

So what does 0% introductory APR on a credit card mean? Well, it does mean you can avoid paying finance charges during the introductory period, but you won’t avoid finance charges unless you pay off your balance in full before the end of the introductory period. If you don’t, then you’ll be charged interest on the entire balance. Also, if you are late on a payment during the introductory period, then the 0% APR could be nullified and you could be stuck with the regular APR.

Also, keep in mind that only a select group of people are eligible for the 0% APR offers. You must have a good credit score, and when buying a car, you often must have a significant down payment – typically at least 10%.

If you see a car commercial promoting one of these 0% offers and then you go to the dealership ready to sign on the dotted line, you may be surprised to find out that the 0% APR is not available to you. 

So approach 0% APR offers with a healthy dose of skepticism. If you’re eligible, and if you are confident you’ll be able to pay on time each month, then it could be a good deal for you depending on your circumstances. Otherwise, try to avoid getting caught up in the “hype” and signing up for something that will cost you a lot of money in the long run.

Knowing how APR works will give you the financial aptitude to make good decisions when getting a credit card, taking out a mortgage, or applying for a car loan. It will also help you avoid any 0% APR offers that might not be legitimate or trustworthy.

The post What Does 0% APR Really Mean? appeared first on The Avant Blog.