Understanding Credit Cards and Payday Loans


Do you need money right away? You are probably thinking that credit cards are the answer. The idea of a credit card is certainly a smart and convenient one: here is a card that can be used almost anywhere and can be used instead of cash or check. However, what should you know about a credit card before signing up for one? First of all, there is the need to learn discipline and money management when it comes to spending and paying bills. Too many people tend to treat their cards like a second bank account instead of a credit resource. What?s the difference? A bank account represents money that you have to spend; a credit card is essentially a debt that you have, that you must pay. Credit is not money and should not be treated as such. When this advice is ignored, then debt starts to accumulate quickly.

This is not to suggest that having a credit card is a bad idea. Credit cards are very convenient. If you forget your cash or find out a merchant doesn?t take checks, then a credit card can be a lifesaver! A credit card may also be required for online payments and other online issues. Yes, it does take some self-control and some financial discipline to be able to use a credit card responsibly. Therefore, impulsive buyers may want to stay clear of credit cards, or at least leave the card at home (instead, withdrawing specific cash when needed) before going out.

This information is moot when you have no credit or have negative credit history. What can you do when you are unable to qualify for a credit card but still need access to emergency funds? Consider the option of payday loans. Payday loans, unlike credit card lenders, are relatively easy to qualify for. Whereas credit cards require an acceptable credit history, payday loans can be handed out even to a person with a history of repossessions and bankruptcy filings. Whereas a bank loan will require stable residential and employment history, payday loans can be given to a vagabond and world traveler.

Now there is a qualifying process one must go through in order to get payday loans. Unlike credit cards, the process is relatively easy. If you don?t have any collateral then payday lenders might want a stable history and employment record (such as a year?s time at your current address or job). They will also require that you tell the truth on your application (and they will verify listed information). What if you have nothing to give but your honest word? Then you may need to put forth a little bit of collateral to show the lender you?re serious about repaying the loan. For example, some lenders will take a car title as collateral. Secured loans are always easier to qualify for, since they minimize the risk of the lender.

You will have about 30 days or so to pay back the loan. Most payday lenders offer short-term contracts, unlike credit cards which have indefinite time frames. The loan is based on the current market value of your car so you will get about 80% of what the car is worth. If you are unwilling to pay back the debt on the appropriate date, then the company has the right to take possession of the car. You will have handed the company the clear car title. This forgives your debt right away and ensures the company doesn?t lose money.

Is this borrowing arrangement worth the risk? Keep in mind that not all lenders will immediately take possession of the car. Some might offer a ?roll over? option, which involves financing the loan. However, this option usually comes with high interest, so it?s best to pay off the loan quickly. Remember that like credit cards, payday loan advances are only supposed to work as an emergency resource. If you have the money?meaning that you have a job and will have the sum amount paid off within a month or so, when your next paycheck comes in?then a payday loan will bring you no real risk.

However, if you attempt to use this new credit as cash, and pay for something you can never afford any time soon, this is going to cause a serious problem. Unlike credit cards, payday loans are not meant to be open-ended or revolving accounts. They are meant to be paid by an upcoming paycheck; that way the borrower saves on interest while the lender reduces risk. If you remember these important points, then you can use credit cards and payday loans the way they were intended?and stay out of debt!

For more information look up credit cards and cash advance online from a major company website. Compare interest rates and determine a loan plan that?s right for you.