Online Payday Loans Vs. Credit Cards: What You Need To Know

Published: 08th April 2015
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The instability of economies in various countries has led to a notable increase in borrowing activities, including online payday loans. Spenders are currently faced with many different borrowing avenues, and this gives consumer's easy access to additional cash in the form of a payday loan, which can be had in just a few hours. There are still traditional methods, such as credit cards, which are widely used in the market even though there are newer methods to get credit.

Basically, both of these methods perform a similar task, which is providing those who need quick cash that is to be settled with interest on top of the premium. These two methods have advantages and disadvantages, and it is better to look at them keenly in order to draw the distinction between the two types of credit.

The first obvious difference is that a credit card will offer you a credit line that is controlled by a plastic card. The owner of the card can use it to make purchases within a set limit. Borrowers are to pay interest on every purchase made. These credit cards can also be used to get money from the ATM machines, and this is also charged.

On the other hand, payday loan lenders deposit cash into the borrower's bank account. The interest charged on these loans is inclusive. Borrowers can withdraw this cash as they so wish or load it on cards and make purchases.

Credit card application procedures are a bit strict. This is because before the cardholder is issued one, background checks on borrowing history are done. If the borrower has a good credit rating, he may be allowed to have a credit card. On the other hand, if the applicant has a poor history of repayment, the request can be denied.

Online payday loans are not based on the borrower's credit score, as all that is required are personal details, employment status and a bank account. The good thing about this application is that approval is instant once verification is done, unlike with credit cards.

When it comes to interest rates, you will find that direct lender payday loan lenders charge higher interest rates than those of banks. The payday financiers will charge up to 30 percent, and the loan is only for a few weeks. The good thing is that the limits of such advances tend to be lower than those of credit cards.

All the options have advantages and disadvantages, and it is clearly not possible to decide on which one to go for without knowing your individual situation. What will determine choosing a certain method is the need that you may have at that time. However, it is important that you have knowledge about the options so you can choose the one preferred based on the prevailing circumstances.

What you have to remember is that payday loan lenders will charge higher interest rates and have a predetermined period of payback, which is at the end of the current pay period. It can be acquired even with a bad credit ratings while the credits card offers no such reprieve. Credit cards, on the other hand, require you to have a decent credit score; it also helps you to adapt to paying back the borrowed money in order to acquire more the next time you are in need. Otherwise, you may have no choice but to take out an online payday loan.


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