Should I use a Payday Loan or a Credit Card?

If you are in the situation where you are trying to choose between different lending options then it can be quite tricky to make the right decision. It is not easy and it can be down to personal circumstances as to which might be the best for you. For example, both a payday loan and a credit card can offer a relatively small amount of borrowing fairly quickly and you may wonder which could be best. It is good to understand more about them first as they work very differently.

Credit Cards
Credit cards are usually only offered to those people that have a good credit record. They can take a while to organise, but once you have one you will be able to use them to pay for things without having to use cash. You will have up to six weeks before you have to repay them. You will then be sent a statement which will let you know the minimum amount that you will have to pay and how much you be charged in interest if you only repay that amount. You will also have the option of repaying in full with no charges or repaying a proportion of what is owed and not pay such a high charge. Most shops accept credit cards and so they can be handy when shopping but also might be able to be used for paying bills. Sometimes there are charges for using them and if you use them to withdraw cash from an ATM then you will be charged. The cards can be good if you can afford to repay them in full as there are no charges at all then, which is something not offered by any other loan.

Payday Loans
Payday loans will allow you to borrow a few hundred pounds until you next get paid. They can be arranged very quickly and no credit check is done. You usually have to repay in one lump sum when you get paid. The loans therefore do not last very long which means that you can get the stress of being a borrower over a done with very quickly. The can be expensive though, especially if you do not repay on time.

Which is Best?
Choosing which is best will depend on your circumstances. Firstly, if you need the money really quickly and do not have a credit card already, then a payday loan will be much quicker. However, if you already have a credit card, then the credit card will be quicker. If you have a poor credit record and have no credit card then you may find it tricky to get one whereas this will not be the case for a payday loan.

If you still have both as an option then compare the costs. The monthly costs could be very different with a credit card being free if you pay if off immediately but there will always be charges for a payday loan. However, if you do not pay the credit card off right away and only repay the minimum until it is paid off, it might be dearer than a payday loan. It is worth looking at the figures and thinking about how long it might take you to repay a credit card and therefore roughly how much it might cost you.

Repaying the payday loan in a lump sum is an advantage to those borrowers that would like to get rid of their debt really quickly and are confident that they will be able to repay it right away. However, some may prefer the flexibility of a credit card and being able to take longer to repay it which will mean they will not have to find the money all at once, which may be too difficult for them. They may also fear the cost of not repaying a payday loan which could potentially be a lot higher than spreading the cost of a credit card. However, if you leave the credit card debt outstanding for a long time or do not even pay the minimum balance, then it can get really expensive too.

As you can see, it is a really personal decision. It will depend on your credit record, how quickly you need the money and how you want to repay it. It is worth also considering other options such as using any savings you have, going without entirely or using an overdraft or alternative loan as these might be cheaper. It will take time to think about all this, but will be worth it if you find the right loan type for you. It may not take as long as it seems either, it is just a case of deciding which you would like and working out the costs so that you can properly compare your options.