Credit Cards

Is a Payday Loan Better than a Credit Card?

Trying to decide what type of borrowing to use can be pretty tricky. You will need to think about whether you can get enough money using the type that you select, that you can afford the repayments and that you are happy with the lender as well. Sometimes lending types can seem quite similar and it is important to weigh up the differences between them. For example, if you are choosing between a payday loan and a credit card.

About payday loans

A payday loan is usually for a few hundred dollars maybe up to a thousand. Due to the fact that no credit check is done it means that even if you have a low credit score you can still get one. You will have to have an income though and a bank account. The loans are usually repaid in one instalment which comes out of your checking account by direct debit on the day that you are paid. This means that you will not forget to pay it and you will get the repayment all done at once.

The problem with this is that you will need to make sure that you have enough money to cover that repayment as well as all of your other expenses in that month. If you do not have enough to cover the repayment you will be charged extra money and the lender will keep trying to take the money until it is available. As it is set to come out on your payday it should be fine anyway as long as there are no problems with your pay arriving.

A payday loan can normally be organised very quickly. Some companies can get you the money within a few hours and others may just take a few days. This means that if you need money in an emergency then they can be very helpful.
As a payday loan is available for those with a low credit score then it means that it is expensive compared with some other types of lending. This is because the lender is taking a risk by lending to someone that may not be able to make the repayments. However, they have to be repaid quickly, which means there is less chance of gees and charges escalating and the loan should not be stressful as it disappears quickly.

About credit cards

A credit card can be used for buying goods and they do not have to be paid for until the bill arrives. When the bill does arrive, it will have payment options. The borrower will have to repay a minimum balance which will usually cover the interest, any charges and just a tiny bit more. However, if they choose this option they will have to pay interest on what is left unpaid. They will also have the option of repaying the balance in full and not getting charged anything at all.

You do need to have a reasonable credit score to get a credit card and when you apply it will take a while before the card arrives and you will then have to wait for the PIN as well. You may also be turned down and have to apply elsewhere.

Credit cards can be very expensive. If you only repay the minimum balance you could find that you will end up paying a lot in interest. It can be difficult to monitor how much interest you are paying as well because you have to pay it off each month. It is therefore easy to forget how much you are actually paying and therefore to forget that the card is expensive and should be repaid.

Choosing between them

If you have a low credit score then you may have no choice but to get a payday loan. If you need money quickly and do not already have a credit card then applying for it may take too long and so you may prefer to go for the payday loan. Although a payday loan can be dearer, this will depend on how quickly you repay the credit card. If you plan on repaying it right away then the credit card will be much cheaper as there will be no fees at all. You may even be able to borrow the money for longer without repaying it. However, if you plan on only repaying the minimum then the credit card could work out much dearer. It could be years until you pay it off in full and paying interest each month will be costly.

It can be obvious which is the right one for you but it may not be so. Think about how they work and which you think will suit you. If you feel there is a risk of you being reckless with a credit card and only repaying the minimum then this will be an expensive choice compared with the payday loan which you have to repay very quickly.

Home Loans

Should I Take out the Biggest Home Loan I can?

If you are looking to buy a home then you will need to think about how you are going to afford it. Most people will look to getting a home loan to pay for it as they will be unlikely to have that much money available to pay out. There are many home loans and many lenders offering them and it is important to make sure that you have a full understanding of what is available so that you make the right decisions. One of the decisions you will need to make is how much to borrow and this can be one of the most important ones.

The cost of the mortgage

It is really important to look at how much you will be paying in total for your home loan. You should be able to find out how much you will repay including the charges and interest. This will allow you to see how much your home will actually cost you. It is easy to look at the cost in terms of the sale price of the property but you also need to allow for the cost of the loan on top. As you will be borrowing for such a long time then the cost will be very high. It will depend on the interest rate that you pay and so if you can find one that is low then that will be really helpful.

It is worth looking at the charges if you miss a repayment as well. You may feel that you will never do this, but if you are comparing different lenders then it is a good idea to just take a look at them and compare. Then if two lenders are very similar this might be a factor that you will take into consideration.

It is also important to think about the repayments for the mortgage. You need to find out from the lender how much these will be and for how long you will be paying them. Then you will be able to calculate if you can afford them. This is crucial as you will be paying for a long time and you want to make it as easy as possible for yourself. Consider how much you can afford now but also think about the future and whether there are likely to be any events that take place that may make it difficult to afford the repayments. It can be tricky to imagine this but it is worth trying as you want to make sure that you do not miss repayments as this will be expensive and if you miss a lot you could even end up having the property repossessed by the lender.

How much to borrow

Deciding how much to borrow is difficult. If you have seen a property that you really like then you will want to borrow enough to afford it. However, it is so important to be realistic. If it is not too late it is better to decide how much to borrow and then look for properties that are within your price range. This will stop you wanting places that are too expensive.
Obviously, the amount that you can borrow will be determined by how much you earn as well. The lender will decide how much they are prepared to let you have. If you have a lump sum to put down as well this will really help as you will be able to get a more expensive property without having a bigger home loan. So, planning in advance and saving as much as you can will really help you there.
Many people will borrow as much as they can so that they can get the best possible property and assume that their income will go up over the years and they will find the repayments easier. However, it is worth being cautious about doing this. Firstly, if you lose your job in the short term then you will really struggle to cope financially and if your mortgage payments were a bit lower this would help. If you have a family in the future then this will mean that your expenses go up a lot and again it could make finding enough money to cover the mortgage difficult. If your do not have a fixed rate then you could find the interest on the mortgage goes up and this could make it more difficult to manage as well.

Although it is hard to predict what might happen it is worth considering different scenarios and thinking about how you might manage to cope in them. You may be able to build up some savings to help you, you may feel your job prospects are good and your pay will improve or you may be looking for a partner before you have children so there will be two incomes available. However, making sure you manage those repayments should always be a priority.