5 Key Differences between a Payday Loan and a Credit Card. What is the best?
Want to Compare Loans from $ 5,000 to $ 500,000 Pesos ?: Credit Calculator
In our country there are two recommended options that we have at the time of accessing financing, we talk about payday loans and credit cards, tools that initially seem to provide the same answer, since both alternatives provide liquidity to those who use them helping them to solve specific expenses are the same unexpected or planned. However, there are key differences between the two options that make the use of the credit card better in certain situations while the application for a payday loan is preferable in other cases. Today we will see what those differences are and when it is better to use each one.
How do credit cards and payday loans work?
In order to understand the differences between credit cards and payday loans, it is important to understand their operations, since, with credit cards, an agreement is established between the client and the entity in which a maximum credit limit is fixed. based on the financial evaluation performed on the client so that he can make purchases up to that limit, financing them in one or more installments according to his choice, in the payday loans the applicant accesses a specific amount of money that he will have to repay in a period determined.
As we can see, in both cases liquidity is obtained to face an expense, however, due to particular characteristics we can say that there are 5 key differences between a payday loan and a credit card:
1. The amounts and terms.
In relation to this issue it is possible to say that the amounts that can be obtained through the hiring of a payday loan are much higher than those that can be granted by a credit card, in addition, the terms established for the return of the money they tend to be more extensive for payday loans than for purchases with credit cards, these being two of the reasons why it is better to hire a loan to make significant expenses. For its part, it is more convenient to opt for the credit card when the expenses are minor and do not compromise personal finances. With regard to terms, both a credit card and a payday loan, it is advisable to opt for the shortest possible time so that in this way the financing costs are lower.
2. The ease of access.
In this issue, the advantage is for credit cards, since, because they grant smaller amounts than payday loans, they ask for fewer requirements for access. In both cases, the entity in question will perform a risk assessment to know what the customer’s debt capacity is, being more detailed what is done in the case of payday loans. In addition, for the request of a loan, the presentation of guarantees such as guarantees or goods that guarantee payment in the event of the client’s default is required. Given this difference, it is faster to process a credit card than a payday loan. A useful advice in case you want to get a credit card, is to process it in a bank that is already a client, then, the check will be much faster.
3. The financial cost.
What is gained in flexibility and speed for approval with credit cards is lost in relation to financing costs, because they are higher than in payday loans. The cantidades fixedódigos for promover buy in a infección with a credit card inches are ojos superior to infección in proportion are promover for aunctional habitaciones bambú that, in turn observables fixed habitaciones for all the desafío bambú. On the other hand, with the credit cards two types of interest are paid, which are charged for the money that was used and those that are charged for the advantage of having the rest of the quota available to use it when desired. In turn, credit cards are now accompanied by associated insurance and in many cases maintenance fees, even if they are not used.
It is known that it is possible to withdraw cash from an ATM with a credit card, a fact that shows serious disadvantages in accessing cash through a payday loan because the interest for withdrawals with cards is among the highest in the market, so, in these cases, the cost of financing will be much higher than that of payday loans.
The expenses that people have to face are not always planned, therefore, in many cases the quickest possible financing is sought because they have to face an unforeseen event such as, for example, solving the costs of reparation before the breakdown of a car. In those cases, the best thing is that if you already have a credit card you can choose it, because to use it you only have to have the quota released and no prior authorization will be necessary. As we said, a payday loan requires other times for approval, since the evaluation processes are more complex than those carried out by credit cards.
5. The way to return the money.
In the case of payday loans, the most common is that an agreement is reached between the client and the entity with respect to the term established for the return of the money. Based on this, the entity will calculate the amount of the monthly fee. The credit cards have two options when returning the borrowed money, on the one hand, it is possible to pay at the end of the month or at the beginning of the following month, collecting all the purchases made in a month to pay them in full on a given date. concrete With this methodology no interest is paid. On the other hand, the client may opt for a deferred payment, that is, a fixed amount to be paid monthly that does not cover the entire debt. The amount that is returned to the entity is added back to the available balance of the credit card.
Conclusion: What is the best between the credit card and the payday loan?
After having listed the 5 key differences between a credit card and a payday loan, we can conclude that the best option will depend on the particular situation of each person, in the same way, we can advise that, if for example an expense arises for a purchase not planned and you are about to receive the salary soon, it is advisable to opt for the credit card. Now, if the intention is to make a purchase of an important value, or the economic situation that is crossed is complicated, the recommended alternative will be to resort to a payday loan.