When you need to pay for something in a hurry and your bank account doesn't have the funds available to you, you have a choice: you can either apply for a same day loan, or you can use a credit card. Both have their advantages and their drawbacks, but both can help out in the short term if you truly do need a cash injection. We've put together the pros and cons of each so that you can make an informed decision about your borrowing. Same day loans vs credit cards: what will work for you?
The Benefits of Same Day Loans
One of the biggest benefits of taking out a same day loan is the speed. You'll usually receive your money instantly once you have been approved, and that means you can get on with your day knowing that whatever it is that needs to be paid for can easily be dealt with.
Another big benefit is that you can apply online, so no matter what time of the day or night, no matter what day or date, you can still complete your details and find out whether you can borrow the money you need. Holidays, weekends, late nights... unlike when borrowing from a bank, you're not limited. After all,issues that need money to solve can arise at any time. It's not just convenience that this online application is about though; if you have anxiety issues, or a disability that means leaving the house can be difficult, then knowing that you don't have to go to an office to speak to someone and sign forms can be a real relief.
Finally, you can get some usefully high loan amounts from same day lenders. It (probably) won't happen straight away, but over time, as long as you build up a good track record with your lender, you will be offered higher amounts which can be crucial depending on what you need the money for. If you pay back your loans on time, you can feel secure knowing that, should you need it, there will be money there for you in the future.
The Drawbacks of Same Day Loans
There are some drawbacks when it comes to same day loans, however, and they are important to note. The first is that these loans have a much higher interest rate than many other forms of borrowing. That means that over time you'll pay back a lot more than you borrowed, and a lot more than you would if you used a credit card, for example. One of the things to consider with same day loans is that there can also be additional fees due, and they can be big problems. If you are late with your payment, for example, the fees that you'll need to pay will be much bigger than the loan and interest would ever be. You should only take out a same day loan if you are absolutely sure you can pay it back on time.
Alt: A couple is considering having a loan
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Same day loans can also negatively affect your credit rating. When you apply for a same day loan the lender will use a credit rating agency to check whether you are suitable - that will be recorded. What will also be recorded is if you are late with your payment, or fail to pay at all. This can make obtaining credit in the future much more difficult.
The Benefits of Credit Cards
Credit cards give you the world. What does that mean? It means you can purchase items in virtually any country worldwide, through any means - online, in person, over the phone... This is a massive bonus that can be truly useful if you are traveling, or even if you want to buy something from halfway across the world.
As well as buying things safely (there is inbuilt protection when using a credit card) from pretty much wherever you want to, you can also gain rewards through using your credit card. There are bonuses such as cashback schemes, reward points,and money off items including hotel stays, plane tickets, and restaurants. This can be a great way to spend less money overall, especially if you pay off your balance each month; after all, if you're buying the items anyway, why not make a few extra pounds at the same time?
The major benefit of a credit card, of course, is being able to 'buy now, pay later' (and pay in instalments to make life even easier). For unexpected expenses such as car repairs or if your plumbing starts to leak all over the house, using a credit card is ideal because you can leave your current account or savings alone and still pay for what you need to pay for.
Credit cards, if used carefully, are a great way to build credit too. If you make frequent smaller purchases and then pay it all off, or at least keep up to date with your payments, your credit score will improve quickly.
The Drawbacks of Credit Cards
One of the major drawbacks to having a credit card is the interest charged. If you don't pay off your balance quickly, that APR can make your debt situation a bad one(and of course, the items you bought on credit rather than using your debit account will end up being a lot more expensive in the long term). This won't be a problem if you pay your balance off every month, or if you have a card that has a grace period of low or no interest.
There are fees to think about too. Every time you are late with a payment, you could be charged a hefty fee on top of having to pay the money you owe. If this happens every month, the money will soon add up into something unmanageable.
Another drawback to having a credit card is how easy it is to spend on it. It can be all too easy not to realise quite how much you're spending when the money isn't in your current account. That can lead to over-spending, and it can be quite a shock when your credit card statement turns up.
Just as using a credit card carefully can boost your credit score quickly, using a credit card poorly can destroy your credit just as fast. Every time you miss a payment, pay late, keep your card almost topped up to the limit, or even if you have too many credit cards open at once, your credit score will be negatively affected.
Is a same day loan right for me? How about a credit card? Both certainly have their pros and cons. When compared to one another, there will always be one that makes more sense for you and your situation - which one that is will depend on how quickly you need the money, how you intend to repay it, what your credit score is, and your personal preference. Whatever you do and whichever you pick, careful borrowing is the key; do your research first.