Short Term Loans vs. Credit Cards
Are you running short of cash? If you know how to make ends meet, you surely would find ways to overcome it without getting any debt. But if the need for money is drastic and necessary, you may not have any other choice but to apply for financing. For sudden and emergency needs, you may consider two logical and reliable options: short term loans and credit cards. Which of the two should you choose? Let’s weigh their pros and cons.
Short term loans: pros and cons
Unexpected expenses and emergencies inevitably occur. If you are among the numerous consumers who are not able to save a significant amount of their income, you surely would have problems when you find yourself having nothing to spend. To overcome the situation, your most logical resort would be to apply for a short-term loan. Such a financial product is designed to cater to individuals who run short of cash to spend.
But is a short term loan your best option? It is ideal to look at the advantages and disadvantages of such a financial product. The following are the benefits:
- It can be considered as among the fastest ways to obtain a loan. Completion of processing and provision of the amount can take only a few hours.
- You may not have to prepare and submit too many requirements. In most cases, loan providers only require completion of a loan application form, employment information, and basic details of bank account.
- You may not expect to be subjected to a credit check. Thus, you may be eligible for the loan even if you have a low credit score.
- It can be processed and obtained online because there is less paperwork and faster verification process.
Meanwhile, it is not surprising that some consumers may air rants about the product. Here are the common disadvantages of short term loans:
- Don’t expect to obtain a huge amount of loan. You would get approval for a small amount, which may be a strategy of the lender to make sure you would not falter in repayment.
- The short-term loan may come with a high interest rate compared to typical secured and long-term loans. You have to understand that loan providers have to adjust those rates to make up for exposure to risks.
- Repayment period or term of the loan could be short. It should be repaid in at least two weeks, a month, or several months.
Credit cards: pros and cons
It is not surprising that credit cards have become well liked by many consumers since its introduction. Swiping credit cards for purchase transactions is not just convenient and fashionable. It can also be secured especially these days when it is just plain dangerous to carry cash around. Here are more advantages of using credit cards:
- Credit cards can be used anywhere, even abroad.
- The cards can be used for online purchases.
- The products can be used as a financial backup especially during an emergency. It can be used to pay for unexpected healthcare cost, unplanned auto repair, or sudden necessary purchases.
- It is possible to pay off purchases in monthly installments. Credit card users can enjoy discounts and other perks from stores. There is a reward system that brings back favors and privileges to loyal users.
- Credit card transactions can be strategically used to build and rebuild credit card history.
As to be expected, there are also numerous disadvantages to the use of credit cards. Here are some of the most common of those:
- Credit cards pave the way for impulsive, unnecessary, and excessive spending. Users could possibly be compelled to overspend.
- Owning and using too many credit cards may be seen as a detriment and setback by lenders and credit reporting agencies. Thus, possessing too many plastic cards can ruin one’s credit rating especially when there are delayed payments or defaults.
- Credit cards are easily subject to fraud especially online.
Which one would work better for you? Short term loans and credit cards can be advantageous and disadvantageous depending on how you would use those. For now, most financial advisors and experts recommend short term loans more because such products can be easier to manage than credit cards.