Even when you’re in a financial fiasco, you still want to make the best decision for your fiscal future. If you find yourself choosing between taking out a payday loan or using your credit card, ask yourself the following questions to narrow down the best alternative.
How Clear Is My Credit History?
When you apply for a credit card, a company will evaluate your risk as a borrower by analyzing the contents of your credit report, including your score, history, and income. This helps lenders understand where to limit your line of credit; however, it’s ultimately your responsibility to make choices that won’t lower your score. With payday loans, lenders simply approve anyone who has verifiable income, regardless of their history. If they’re unable to repay their loan on time, in full, lenders can send the debt to collectors and ruin their credit reputation. Before making your decision, understand whether you have the means to repay your credit card or payday loan balance before it becomes an issue.
Can I Afford the Additional Fees?
Before you take out a payday loan, consider whether you can afford the extra fees that come with it. Your credit card provider will lay out every term and condition in your account, letting you know exactly how much is due in additional fees, but this amount might change if you use your card for a cash advance. However, payday loans pack in fees that are still far greater than those in any line of credit. On average, payday loans require a $15–25 fee for each $100 borrowed, which you should heavily consider before making your final financial decision.
Am I Ready for the Interest Rate?
Depending on how you use your credit card, you can retain a modest interest rate or end up owing far more than you borrowed. But even the highest credit card interest rates are no match for typical payday loan rates. Before you swipe your card, hit the ATM, or fill out an online application, set a personal and reasonable timeline that maps out when you’ll be able to fully repay the amount borrowed, because a payday loan or cash advance could be due in as little as two weeks. If you’re able to, consider swiping your card as a regular purchase and paying off your balance as quickly as possible to minimize the interest payable.
Who Can I Contact for Help?
No matter which financial alternative you use to finance or purchase, make sure you can handle the terms and conditions that come with it. If you need assistance with finding the right option, partner with the consultants at Progressive Debt Relief. We can help you minimize debt and navigate complex borrowing decisions without jeopardizing your future financial alternatives. To schedule a complimentary consultation, call us today at 1-877-590-1847.
