When unexpected expenses arise, it can be difficult to know how to cover them. Two common options are credit cards and payday loans, but which one is the better choice? In this article, we’ll explore why payday loans are a better option than credit cards.
- Minimum credit check required:
Payday loans don’t require a credit check, which means that even if you have bad credit, you may still be eligible for a loan. This is a significant advantage over credit cards, which require good credit to qualify for lower interest rates and higher credit limits.
- Fast approval process:
Payday loans have a quick approval process. You can typically receive the loan amount within a few hours, while credit cards can take several days or even weeks to be approved. This is particularly useful when you need money quickly to cover an unexpected expense.
- Fixed repayment terms:
Payday loans have fixed repayment terms, which means you know exactly how much you need to repay and when. With credit cards, the repayment terms can be more flexible, which can make it difficult to plan and budget for repayments.
- No ongoing debt:
With a payday loan, you borrow a fixed amount and repay it on a fixed date. This means that you won’t accumulate ongoing debt, unlike credit cards, where you can continue to spend and accrue interest on the balance. This can make it easier to manage your finances and avoid long-term debt.
- Lower interest rates:
Payday loans typically have lower interest rates than credit cards, which can save you money in the long run. Credit cards can have interest rates as high as 20% or more, while payday loans typically have interest rates in the range of 10-15%. This means that you’ll pay less interest on a payday loan, even if the loan term is shorter.
- Better for short-term needs:
Payday loans are better suited for short-term needs, such as unexpected bills or emergencies. Credit cards are better for longer-term purchases, such as a large purchase that you plan to pay off over time. If you only need to borrow money for a short period, a payday loan may be a better option.
In conclusion, payday loans are a better option than credit cards for several reasons. They have no credit check, a fast approval process, fixed repayment terms, no ongoing debt, lower interest rates, and are better suited for short-term needs. While credit cards have their advantages, if you need money quickly and have bad credit, a payday loan is likely the better choice. However, it’s important to remember that payday loans should only be used as a short-term solution and not relied on as a long-term financial strategy.
Why you should choose Payday Loan above Credit Card
- According to a report by the Consumer Financial Protection Bureau (CFPB), the average payday loan borrower takes out eight loans per year, with each loan lasting an average of 18 days. This indicates that payday loans are often used as a short-term solution for financial emergencies.
- A study by the Pew Charitable Trusts found that the average payday loan borrower pays $520 in fees and interest to borrow $375. This highlights the importance of shopping around for the best rates and repayment terms before taking out a payday loan.
- According to a study by CreditCards.com, the average interest rate for credit cards in 2021 was 16.28%. This is significantly higher than the interest rates for payday loans, which typically range from 10-15%.
- The CFPB found that 80% of payday loans are rolled over or renewed within two weeks of the original loan, indicating that many borrowers struggle to repay the loan on time and end up in a cycle of debt.
- According to the National Foundation for Credit Counseling, the average credit card debt per household in the United States was $7,527 in 2020. This shows that credit cards can often lead to long-term debt if not managed responsibly.
By considering these statistics, it becomes clear that payday loans can be a better option than credit cards for short-term needs, such as unexpected expenses or emergencies. However, it’s important to use payday loans responsibly and only as a short-term solution. Shopping around for the best rates and repayment terms, and having a plan in place to repay the loan on time can help borrowers avoid the cycle of debt that can come with payday loans.
