You hardly get enough time to prepare when a financial emergency pops up. Be it an urgent car repair or an immediate treatment expense, you feel tremendous pressure to arrange funds quickly. Both bad credit loans and credit cards can serve during a financial crisis.
However, it is up to you to decide when you must use which option. To be able to make the most out of these options, you must be aware of the best ways to use them. Besides, your repayment ability will be a crucial factor.
Assess the pros and cons of these two popular funding solutions before selecting one. Then, you will understand how and where the given option will come in handy. At the same time, you will be cautious of the aspects that might put you at risk.
When getting loans for bad credit from a direct lender is possible, you must weigh the cost. This is because credit cards come with an interest-free repayment period. If you repay within that duration, you will not have to pay any extra fees.
Therefore, factors like the above should be evaluated carefully. Then, you can focus on the impact of the borrowing decision on your finances. Compare the pros and cons so that you can pick the best option without any dilemma.
How to decide whether to get bad credit loans or use credit cards?
Oftentimes, using the credit card might seem convenient. You already have funds within your reach. However, here, you must not forget about the cash withdrawal charges that will start implying from now onwards.
Therefore, an option might seem easy to obtain and convenient. However, it might include aspects that can be a setback for your finances.
Pros and cons of getting a loan with bad credit
These loans are typical personal loans that a borrower with low credit scores can obtain. There are specialized lenders who will customize an offer based on the financial profile of the loan applicant. Opportunities to borrow will be limited in this case.
Advantages of bad credit loans
Fast disbursal of funds
Bad credit will not fully take away the opportunity to borrow. Moreover, the loan provider will not delay loan processing because of your poor credit. If you can qualify according to the lender, money will be approved and transferred online speedily.
Fixed monthly payments
The interest rates will be fixed once you finalize the loan amount. Depending on it, the monthly payments will be decided. This will not change and will remain the same throughout the loan term. No need to worry about fluctuating monthly payments.
Competitive cost
You will not be forced to accept any interest rates because of your poor credit. Rather, you can pre-qualify and check different offers from different lenders at the same time. This will help you draw a comparison of the offers. You can easily find a loan proposal with competitive rates of interest.
Scope to improve credit scores
These loans allow you to improve your credit history. For this purpose, you must repay loans within the given tenure. Then, you do not have to worry about late fees. At the same time, these timely payments will reflect on your credit report to repair and fix your credit scores.
No collateral commitment is required
These loans are obtainable for a small requirement. For this reason, the lender will not ask you to provide collateral even when your credit scores are not perfect. With noteworthy affordability, you can win the confidence of the loan provider.
Disadvantages of bad credit loans
These loans do not offer advantages only, some of the aspects need your attention as well.
Short repayment term
You should repay loans within a short duration. At times, it might be difficult for you to cover loan payments within that span. This can increase your financial strain during that duration.
Late fees
Time to repay loans will be fixed. You must set a financial plan to arrange funds within the given duration for the timely repayment of loans. In case of a slight delay, you will have to accept the additional burden of penalties.
Pros and cons of credit cards
A credit limit will be set for you to use in case of a credit card. You can pay back the balance in full or in the form of monthly instalments. Interest will be charged on the remaining amount from the balance if repayments are not completed on time and in full.
Advantages of loans with bad credit
Spend flexibly
You do not have to withdraw money to spend for any purpose. You can swipe the card and pay for the expenses you want. There are no obligations for which expenses you should cover.
Any time money
Repay only the borrowed amount
There is an interest-free period available with this card. It allows you to pay back the amount you have borrowed. Since no interest rates will be charged on this amount, you do not have to worry about paying an increased amount.
Disadvantages of bad credit loans
Debt spiral
Outstanding balances will attract high interest rates. If you are not able to meet the balances, you can never be out of the debt loop. It will be like an ongoing debt trap.
Restrictions on the credit limit
When you have poor credit scores, the accessible credit limit for you might be very low. This can directly impact the amount of money you can utilize for emergency purposes.
The bottom line
To answer which option from bad credit loans and credit cards would be best for you, certain pointers should be kept in mind. The decision might vary depending on your individual financial situation. For lump sum money, you can get bad credit loan provided you are in a position to repay loans on time.
On the other hand, if you want to have an arrangement in place to fetch money for various needs, a credit card would be best.
