Like most people, you might sometimes find yourself in a situation where you need a financing solution, in which case you might be tempted to opt for a quick loan, or perhaps apply for a credit card. But which one is better suited to your needs? Does it matter what financing option you choose?
Of course, the details matter and you should also do proper research before committing to a loan of any kind. Make sure you find out the top things to know about quick loans, including how much you can get, what the loan terms are, etc.
The type of financing that is best for you depends on multiple different factors, and the decision should be based on what is best for your financial needs. For that, you need to analyse your financial situation and both the financing options to determine which one best covers all of your expenses.
Quick Loans Vs. Credit Cards: How Much Do You Need to Borrow?
Naturally, the most important question to answer, and the one that will determine which way to go with your loan is how much money you need or want to borrow.
It’s good to know that credit cards come with a relatively low credit limit, so if you need to borrow a very high sum, then this is not going to be the option for you, as it is better suited to smaller sums. A quick loan, however, offers you up to around £5000.
However, on average, a UK citizen has two credit cards, which bumps the credit limit to a higher sum. Of course, that relies on your financial situation being stable enough for the bank to grant you two credit cards and a higher credit limit. You can check your credit score at Equifax.
Quick Loans Vs. Credit Cards: Is This a One-Time Emergency?
Now, let’s look at the “why”: why do you need this money? Is it a one-time mishap, an emergency you need money for quickly, for a short amount of time? That can happen at any time – you need a quick repair for your car, or to pay off a medical bill of some sort, or there is some work you need to do on the house. In a situation like this, a quick loan is perfectly suitable, assuming you can afford to pay it back on time, including the high interest rate.
Quick Loans Vs. Credit Cards: Do You Find Yourself in Need of Financing Often?
But let’s assume you find yourself on the other side of the coin – this need for financing isn’t a rare thing. In fact, you find that you are struggling to pay monthly expenses and you frequently become unable to pay things off by the end of the month.
It sounds like you are struggling with managing your day to day finances or perhaps don’t have enough income to cover your basic expenses, in which case, a credit card could be the right answer to your problems.
This way, you have a monthly allowance of extra income that you need to pay off at the end of the month, but there is less of a chance for you to go into serious debt because of it, compared to a quick loan.
The interest rate is comparably lower, and it is an overall better, more affordable and more manageable situation than taking quick loans repeatedly.
Quick Loans Vs. Credit Cards: Is it a Big Purchase or General Expenses?
Maybe you want to purchase something expensive, like a car, or put down a deposit for something. Can you put that on your credit card? Technically, if your credit limit is high enough, you can, but it is not wise to max out your credit cards for something like this, especially if you have more than one card.
In this instance, a quick loan that can be repaid in instalments over several months is the smarter solution for your financial well-being.
But what if you’re interested in just general expenses, whether that’s something you need, or just want something extra for a shopping spree or two? Rather than get a personal or quick loan, that better go on your credit card.
Quick Loans Vs. Credit Cards: Is the Interest Rate a Problem for You?
Let’s address the elephant in the room – with any loan you get, whether it’s a credit card or a quick loan, there is going to be a certain amount of interest to pay, in exchange for you being allowed to borrow this money.
Depending on how high it is, this may or may not be a hindrance or a deal-breaker for certain types of financing. Regarding credit cards compared to quick loans, the latter will definitely have a higher interest rate.
Credit cards, while still requiring you to pay interest, come with a lower rate than loans. That is because quick loans are unsecured loans and the lending company needs something from you to secure the loan in case of non-payment.
If you are uncomfortable paying that much extra money for your loan, or cannot afford the resulting repayments, then perhaps a better solution for you is to opt for a credit card, instead.
All in all, both financing options are excellent choices for different financial needs and situations. While they have similarities in some respects, they are also different enough to work for different people and different needs.
If you have a one-time financial emergency or an expense that requires a large amount of money, then you are better off going for quick loans, if you can stomach the high interest rate that you need to pay.
If, on the other hand, your financial trouble is on-going, or you’re only in need of money for minor or day-to-day expenses, a credit card might meet your needs with a lower interest rate, thus reducing the risk of debt and inability to repay.