You can get large loans for things like homes and cars through mortgage lenders and car dealerships, but what do you do when you do not need that much money? What do you do when you just need a small amount of cash so that you can make ends meet? There are many times when these smaller loans would be helpful, such as when you need a few hundred dollars to pay off your mortgage, but going to the bank every time is not practical. You need to look for other ways to get this money.
Two Standard Choices
The main two tactics that people use for small loans are payday loans, which are also known as cash advances, and credit cards. There are some similarities, such as the fact that both give you a little bit of money that has to be paid back after a very short amount of time. There are also some large differences, though, so you need to understand what is right for you. When comparing a credit card vs payday loan options, be sure to do your research so that your decision matches your unique situation.
Credit Card vs Payday Loan
When you use a credit card, you are basically borrowing money every time that you buy something. The amount that you borrow will be different every month. It all depends on how much you buy. You will have a cap, but you can borrow even as little as five dollars instantly. A payday loan is different in that you will get the full amount up front, and then you can spend it however you would like. At the end of the month, you have to pay back the full amount, supplementing what you have left with what you have earned at work.
A large advantage that a payday loan has over a credit card is that your credit score does not matter. Have you ever tried to get a new credit card with a poor credit score? If you have, you have probably been declined more times than you can remember. This can be frustrating because you may be paying for a financial mistake that you made years ago. This will not leave you for a long time. A payday loan company will just want to see proof of what you make right at the time that you apply for the loan, though, so your credit score is irrelevant.
This also means that you may be able to get a payday loan for more than the max on your credit card. If you have poor credit and you could only get a card with a max of $1000, it will not help you at all if you have $1500 of car repair bills. If you make $4000 a month, though, you can get a cash advance for more than $1000 because you will make enough to pay it off. These numbers will be different for everyone, but the payday loan can be more helpful in this way.