Wednesday, August 29, 2012
Why Payday Loans are better than Credit Cards’ Cash Advance Features - SP
People who are in dire and immediate need of cash can have two logical options: payday loans and cash advance from credit cards. Both can be considered as forms of quick loans that are easily and quickly available to borrowers. However, it is quite obvious that the two have significant differences.
No one can tell when you need extra cash. You may have been allocating personal funds for urgent cash requirements. But most of the time, the need to outsource additional money can be inevitable. You may have to spend for healthcare provisions, purchase necessary items, make unforeseen investments, or cover financial shortages to shoulder financial obligations.
Experts can easily declare that payday loans are better and are more recommended than the use of
credit card facilities. Here are some of the most pressing reasons why these loan products are better in
Payday loan products
These loans are becoming more popular. These are considered quick loans because it usually takes just
a few hours or a day to have applications approved and to obtain the amount being borrowed. There
is also not many requirements for documentation. The loans do not even require guarantors.
Payday loan products can be obtained from the borrower’s employer or from a third party, usually
a loan provider or even a bank that specialises on such loans. These come in shorter terms, which
usually last from a month or two. The idea is to borrow and commit to repay the amount in full on the
next salary day. That is why the amount is usually not that significant; it should be fully covered by the
amount of salary on the next payday.
Many borrowers find the very short term as a disadvantage. However, those who understand the dynamics of loans know that it should not be considered as a setback. The short term means the overall
expense for servicing the loans (interest and other fees) will be minimal compared to other types of
loans. In the end, these loans are cheaper than others, provided you pay them back on time.
Credit card cash advance
The cash advance feature of credit cards is also considered as a popular form of quick loans. It is quite
fast to obtain the required amount. Any credit card with that feature can be used to withdraw an
amount in an ATM. That will be considered a loan, which will have to be repaid in full or in installment in the coming months.
Borrowers usually opt to repay the borrowed amount in installment terms. At times, when the times
get tough, they sometimes pay only the minimum amount required, which may not hurt the budget that much. However, the longer the loan stays, the more expensive it gets because it will keep on incurring interest payments and fees. Aside from that, the cash advance feature also comes with higher interest rates compared to other traditional personal loans.
Moreover, payday loans are often considered as the better option between the two. It can be obtained
fast. It will not incur high interest payment (if paid back on time). And lastly, it will not pose any risk especially to an individual’s cash position and credit history, if used properly.
This post was not written by me, and I am a big believer of avoiding debt at all costs. I understand that in some cases people need cash NOW and often turn to quick loans or credit advances though. These sorts of debts come with steep interest rates and fees though, so need to be checked thoroughly and only used as a very last resort. I have a post on 11 ways to get cash fast which might be of interest if you need cash now.