Are installment loans the only options worth looking into, or are there good alternatives? Credit cards are another popular choice among many borrowers, and with good reason, as they bring many advantages. But which option is best? Keep reading to find out!
Benefits of Installment Loans
Let's start off by talking about the benefits of installment loans. Why should you consider them as your best option? What can they offer you that other alternatives do not? Is there anything special you should know about?
You can repay the loan in installments
Obviously, the first thing to note is that you can repay the loan back in regular installments. This is a pretty standard feature nowadays with most payday loans, and it can be extremely valuable, because it makes the loan so much more affordable and it minimises the chance of defaulting. While payday loans used to be paid in full after one month, you can now benefit from a longer repayment period, according to how much you actually borrow. Most people who go for installment loans because of the fact that they can pay them back easily and fit the installments into their budgets.
You can get it with bad credit
One thing that a lot of borrowers are very concerned with is their credit rating and how this can affect their ability to borrow money. If you have a poor credit score, you may be familiar with the hardships that can entail. You may even be asking yourself "Can I get installment loans for bad credit?" Poor credit attracts lower borrowing limits, as well as shorter repayment terms and higher interest rates. In the worst case scenario, it can hinder you from borrowing altogether, as lenders reject you, thus damaging your score further. It's like a catch-22. That's why having the option of payday loans with bad credit and payday loans with no credit check is so important - it makes it accessible for people who are struggling.
Easily accessible from different lenders
The other thing you should keep in mind is general accessibility. While with credit cards, you have to go to a bank, you can get installment loans from a variety of different lenders and lending companies, both online and on the high street. That means that you have more options to choose from, so you can browse offers at your leisure, before choosing the most convenient one.
In addition, if you are rejected by one establishment, you can always move on to another one. However, it is always advisable to perform a soft search before, just so you know for sure whether you would be approved or not and your credit score isn't affected by a possible rejection. Make sure to check the Financial Conduct Authority (FCA) to verify that the lending company you choose is authorised.
Benefits of Credit Cards
And since we considered the benefits of installment loans, we also have to talk about credit cards. What options to they bring to the table that installment loans don't? How do they compare? Are they better in any way?
You can get one at your regular bank
Now, even though a credit card may be limiting in terms of places where you can get it from, there are certain perks you may be able to enjoy. Some banks will offer you incentives if you already have a current account with them, so it may be worth looking into what your regular bank can do for you. In addition, we cannot ignore advantages like 0% credit cards. This is a type of credit card that has 0% interest for an introductory period of 6 to 12 months, typically. Assuming you can repay the money before that grace period ends, you basically get away with a loan with no interest, which is not something you can say about installment loans.
You can get multiple cards
One other benefit is that you can have multiple cards, from multiple places, and serving different purposes. For example, you can have an emergency credit card that you keep in your back pocket, just in case. Then, you might have a credit card that you use all the time. You can have different store cards, if you make regular purchases in certain shops and you want to have the option of paying later for your purchases, etc. This can give you a lot of flexibility that you wouldn't otherwise have with installment loans.
You can make minimum payments
Where repayment is concerned, the system with credit cards is different, but also similar in some ways. Technically, you incur an amount of debt on your credit card and you're supposed to pay off the balance at the end of the month. If not, you are going to be paying a non-negligible amount of interest on that money. However, the full repayment is not necessary, if you cannot afford it every month, as you have the option of only paying a minimum required amount, which is only a fraction of the actual debt. So in that regard, it's kind of like paying in installments. Of course, you will have to pay off the entire amount at some point, otherwise it will continue to increase and you run into deeper issues.
A Personal Choice Checklist
Of course, which type of lending you go for ultimately comes down to personal choice and what your financial needs are. Here are some good questions to ask yourself in order to determine which option is best:
- Do you need a one-time loan or an ongoing one?
- Are you ok with repaying much more than you borrowed?
- Do you have a good credit rating?
- Do you have issues managing multiple sources of debt?
- Do you have time to look for lenders and make sure they're legitimate?
In conclusion, both borrowing options can be the perfect financing solution for someone, depending on their needs. You may have numerous questions about them - can installment loans improve credit ratings? Can you get credit cards with no interest? Can I borrow money with bad credit? You will receive the answers to all of these questions and more and be able to make the best decision for you.