There are occasions when one has a sudden need for a sum of money. It isn’t a viable choice to apply for a personal loan through a bank because it takes a long time to get approved and requires a lot of paperwork buy cvv.
However, credit cards and payday loans are two possibilities that can satisfy your needs. The eligibility criteria for credit cards and payday loans are at opposite ends of the spectrum. With CocoLoan, you can assess each offer from various lenders, check eligibility, and select the most lucrative loan as per your requirements.
Payday Loans
A payday loan is a small amount of money that is to be paid back with your next paycheck. You can get payday loans, generally ranging from $50 to $5,000. As soon as money is deposited, a lender may gain access to your account and take it.
The loan may occasionally be secured by a post-dated check. To be eligible for a payday loan, one has to fulfill minimal prerequisites. The requirements differ from lender to lender. High rates are this type of loan’s primary feature.
Credit Cards
Credit cards are a great way to obtain money or make purchases without filling out a personal loan application. Your credit score and credit history have a significant impact on the interest rate in this situation. It’s crucial to pay off the loan each month. If not, interest is charged on the balance you carry forward.
What is the better choice?
There is no magical formula for choosing anyone. The decision-making process should heavily weigh the pros and cons because it is purely a personal concern. As you can see, using credit cards or payday loans to get quick cash is a viable option.
If you need money immediately and can repay the cost with your next paycheck, payday loans can be a better option. On the other hand, you can use credit cards and just go overdrawn if you don’t want to look for a lender. Let’s have a look at some of the differences:
Credit cards are a credit line, but payday loans are cash
With payday loans, you will receive a fixed amount of cash in your pocket. A credit card, on the other hand, gives you the choice to spend a certain amount without instantly debiting your bank account. Also, not all bills can be paid with credit cards, like rent, utilities, cable, and phone.
Payday loans charge you for giving you the full amount of cash all at once
A payday loan gets your entire $100 cash advance right away. You will pay interest on the entire $100 even if you don’t utilize any of it. A credit card, on the other hand, has a credit limit and only assesses interest on the amount that is actually used. The usage of money is the essential idea here.
With a payday loan, all of the money is available for use from the first day, and you begin to be charged interest on the entire sum. With a credit card, you only use money when you make a transaction. Therefore, interest only applies to the amount charged and it begins as soon as the card is swiped. You won’t ever pay interest if you never use your credit card.
There is a grace period with no interest on credit cards
With credit cards, you only pay interest on what you use. The grace period for recent activity, often known as the credit card float, is another benefit of using credit cards. This is a time of no interest. The payday loan interest counter begins immediately.
Credit cards cost less than payday loans and installment loans
While most introductory credit cards have interest rates of around 22%, the average credit card in the US has rates of roughly 18%. On the other hand, the average interest rate on a payday loan is over 400%.
Credit cards are far less expensive than traditional payday loans. The payday loan should always be paid off first if you have both a credit card and a payday loan. Your credit rate will almost always be lower, so pay off your higher interest loans first to reduce your interest payments.
Unlike credit cards, payday loans don’t have flexible payment terms
You can pay off the balance of a credit card debt at any moment and in the installments you choose. There is a monthly statement and a minimum payment requirement that must be made once each month, but that’s about it. With a credit card, you have the flexibility to decide when and how much to pay toward debt and interest at your speed. However, with regular payday loans, you have to pay back a certain sum on a certain day. Changing payments with traditional payday lenders is difficult and frequently costs money.
A credit check is not necessary to apply for a standard payday loan, but credit cards do
Credit cards are more affordable, provide a more flexible source of credit, and are easier to repay. A strong credit history is necessary to obtain a credit card.
It is a known fact that using credit cards or payday loans to get quick cash is a viable option. Which one you select is entirely up to you. To avoid getting into a difficult situation, though, make a prudent choice.