You don’t have access to cash and you have sudden expenses on your mind? Fortunately, there are several financing options that will allow you to cover your current needs and unexpected expenses. The most popular financial solutions in the UK certainly include cash loans and credit cards. Is it worth using them and when? We have prepared for you a list of pros and cons of each option, so that you can decide for yourself which solution is right for you.
A cash loan (also known as an installment loan or payday loan) is one of the most popular financing options. Payday loans in the UK are offered by financial institutions, banks and even, as in the case of social loans, by private individuals. Cash loans are a widely and easily available product.
Payday loans in the UK are primarily the fastest financial solution available. All you have to do is complete a quick online application and the money will be on your account the same day (even 15 minutes after the application has been approved!). So you get money straight to your account, without leaving your home.
What’s more, this cash loan is granted for any purpose. So you don’t have to explain to a bank or other institution for which you borrow money. How you use the loan depends entirely on you. In addition, you can apply for a loan in the UK in Polish, so even a language barrier should not be a problem for you.
Another advantage of loans is that you can borrow money even with low creditworthiness. Of course, the amount you can borrow is subordinated to your credit score, but it is still possible to borrow money with low creditworthiness.
The loans have a fixed repayment schedule. You pay a pre-agreed installment on a fixed date, so you can organize your monthly finances more easily and you don’t have to worry about repayment terms ever changing.
Cash loans have a high interest rate. Installment loans do not require any form of security from you, so you have to take into account the fact that you will have to pay back to the lender more than you borrowed. Nevertheless, the choice of lenders is so wide that you will certainly not find a loan with the right interest rate.
Failure to pay the installments on time may result in penalties and may expose you to a bad credit history, so in the future it may be very difficult for you to take a loan. When you decide on this type of financing, you must be sure that you will be able to pay your installments on time.
The credit card allows us to use the bank’s money within the set limit. Credit cards are intended for non-cash transactions, and therefore for all types of payments and purchases. This type of financing is mainly offered by banks.
Credit cards have so-called interest-free period. This means that if you use the card and pay it back during this period, the bank does not charge any interest on your debt. The duration of the interest-free period depends on the bank, however, it usually lasts up to 56 days.
What’s more, credit cards have a chargeback option, thanks to which your payments and purchases are insured by the bank. Imagine that there was a transaction error while shopping and you were counting more than you need. Or maybe the product or service you bought does not meet your expectations, and the seller does not take into account your complaint. Thanks to the chargeback option, in each of the above situations, the bank will refund the money to your account.
A credit card, if used properly, can improve your credit score. A credit card, used wisely, is a very good idea for people who want to improve their credit standing. But remember, for this improvement to occur, you must pay back your debt diligently, otherwise the effect may be counterproductive.
In addition, thanks to your credit card you will be able to take advantage of many different discounts. Many stores have special promotions and offers for credit card users. By using such offers, you’ll be able to save a lot on your cashless transactions.
Credit cards in the UK are harder to access than loans. Credit cards are issued only by financial institutions, which makes the application process more difficult. What’s more, the application process itself takes much longer.
Interest on the debt on the credit card is very high, and failure to pay the debt on time can be associated with considerable debt and a decrease in the credit rating.
In addition, cash transactions by credit card are very expensive. A commission of approximately 4% on the amount withdrawn is charged for every withdrawal at an ATM.
The costs of setting up and using the card are high. These costs can be up to several hundred zlotys a year, so if you are considering taking a credit card, carefully read the bank’s contract and offer.
A credit card in the UK is a good option for people who want to slowly build up their creditworthiness and, when needed, be able to cover the costs of their unexpected expenses or whims. However, for people who need quick cash, a cash loan will be a much better option. An installment loan is also a suitable solution for those who prefer to pay off their debts in an organized and systematic way.
In both cases, the amount we can borrow depends on our credit history and our credit score. However, if we do not have a good credit rating, lenders will look at us more favorably than banks. These two forms of financing are very different, so it all depends on what you need the money for and how urgent the expenses are. Look at the pros and cons of each solution and choose the one that is closest to your requirements.