Insurance and Credit

If you need extra cash to cover expenses, youre probably trying to figure out the best way to borrow money. There are several options to consider, including borrowing money from friends or family, getting a cash advance with your credit card, taking out a traditional bank loan, and applying for payday loan. This article will cover the last two options, bank loans and payday loans, and compare the requirements and advantages of each. After reading more, perhaps youll have a better idea of which is the right choice for you.

There are several important factors to consider when deciding which type of loan you need. Do you need a large amount? What is your credit history? When will you be able to pay back the loan? Lets look at a few key points that can help you decide if you if you should apply for a bank loan or a payday loan:

How much do you need to borrow?

Payday loans tend to be for smaller amounts, usually a few hundred dollars up to around a thousand dollars. The amount you can borrow certainly wont exceed the amount of your next paycheck, because this is the money that the payday lender is counting on for repayment. If you have an unexpected car repair and dont have cash on hand to cover the mechanics bill, a payday loan could cover the costs until your next paycheck comes in. If you need a new car, however, youll have to apply for a bank loan.

What is your credit score?

A banks loan approval process takes time ” typically weeks (or even months in the current economy). So if you need cash fast, a bank loan is not for you. Bank loans work better for planned expenses than for unforeseen financial emergencies. A payday loan, on the other hand, means the loan will be approved quickly and you can have cash in your checking account in as little as 24 hours.

What is your credit score?

Payday loans tend to be for smaller amounts, usually a few hundred dollars up to around a thousand dollars. The amount you can borrow certainly wont exceed the amount of your next paycheck, because this is the money that the payday lender is counting on for repayment. If you have an unexpected car repair and dont have cash on hand to cover the mechanics bill, a payday loan could cover the costs until your next paycheck comes in. If you need a new car, however, youll have to apply for a bank loan.

When are you able to repay the loan?

If you can get approved for a bank loan, youll typically have years to repay the loan and have the option of making very low monthly payments. This is convenient because you know you have time to repay your debt. With a payday loan, you usually have a couple of weeks or at most a month to repay the full amount of the loan, plus the interest charged. You have to keep in mind that a large part of your next paycheck will go to pay back your loan, so be prepared to cover your normal monthly expenses and settle your debt in a tight timeframe.

Finally, a note about interest rates. . .

Remember that a payday loan is a SHORT-TERM credit option. Payday lenders charge high interest rates for the convenience of obtaining a quick and simple loan, so these types of loans should be used for emergency expenses only. Rolling over a payday loan can be costly, so plan on repaying it in full with your next paycheck.

After answering these questions, you should have a better idea of which type of loan best fits your needs. Consider all your options carefully before deciding if a bank loan or a payday loan is right for your financial situation.

Articles and books on personal finance will provide as many tips as possible in an effort to make at least a couple of them stick. This approach may convince readers to save for emergencies and pay out less than they bring in, but in some cases you can say to much without explaining anything.

In this article we’ll focus on just one technique to improve your finances – paying in cash. Here’s how making cash-only purchases can help you to budget, save and invest.

A Plastic Paradise

With rapid increases in the use of plastic over hard currency, some people consider carrying cash old fashioned. To be fair, plastic is much sexier than a bit of coloured paper with a deceased president gazing into the great beyond. Some banks even allow you to customize the colour and graphics on your credit and debit cards.

Debit and credit cards also offer the advantage of security. With them, you need a signature and/or a PIN number to access your funds. Cash is only protected by your ability to defend it should someone want to take it from you.

Except for the odd country store, plastic is accepted in as many places as cash is. Yet cash is almost always the better choice for making a purchase. Here’s why:

Overpaying

One of the drawbacks of credit and debit cards is that they encourage you to spend more than you intend to by giving you easy access to more capital. With cash, spending more than you intend requires going to a bank or ATM, then returning to the store to complete your purchase. This provides time to reconsider whether your budget can handle the extra strain.

Carrying only the cash you are prepared to spend on a given product can prevent you from ‘buying up’ and paying for features you don’t need. This works for minor items, but buying a boat or pickup truck requires more cash than you may be comfortable carrying on you. If a cheque can’t be used, a debit card is better than a credit card because you can only spend money you already have.

Over-Shopping

Cards won’t just lead you to pay too much for single purchases, they also encourage you to buy more items than you mean to. Stores build displays to make their wares appealing so that you will purchase more. In some cases a checklist is insufficient in preventing impulse buys.

People tend to spend more with credit cards than with cash. One study found that people spend up to 18% more when using credit cards, and McDonald’s notes that average purchases rose from $4.50 to $7 when customers used plastic over cash.

Only carrying enough cash to buy the things on your list is the best way to shop within your budget. If you take the time, you can find sales or inexpensive alternatives to your regular brands to make your cash go further.

Cash Vs. Credit

For the purpose of this article, cash means money you have already earned. Using your Visa for a cash advance does not solve the problem of using high-interest debt to cover your expenses.

Cash has one clear advantage over credit cards: if you carry a balance on your card, or only make the minimum monthly payment, you will incur interest at a rate of 15% or more on your purchase. This means paying $15 or more for every $100 you spend. If you save enough cash for the same purchase, you give yourself the equivalent of a 15% discount by not using your card.

Cash Vs. Debit

If we just portrayed cash as a better alternative to credit cards, few would argue against us. In contrast, debit cards enjoy a protected status, despite ATM fees.

A debit card can also trivialize purchases. Being a square of plastic, it is difficult to tell how much money is spent through your debit card. It becomes a matter of $2 here, $6 there and so on until you give up tracking how much you spend. It’s a shock when the monthly statement comes. With cash, you can monitor your funds as you spend.

Conclusion

Using a credit or debit card offers more security than cash in most cases. For large purchases, cash is often not an option and writing a check or getting a bank draft may be more trouble than it is worth. In addition, a properly used debit card can be a great alternative to cash instead of resulting in credit card issues.

A credit card can also be a convenient tool, but it’s only a fair substitute for cash when your balance is paid in full at the end of each month. Otherwise, your reward for convenience is debt.

If you tend to overspend, shopping with cash is one way to adhere to your budget and limit impulse buying.

You can’t take your eyes off that brand new Fusion Hybrid – alright, so it’s a Hyundai – but it’s impressive and you just got to have it, the sooner, the better. However, you definitely don’t want to be burdened with paying almost twice the car’s price by the time you’re through with the car loan payments.

Below are some tips you can use to get the lowest possible auto loan interest rate to put your dream car right in your garage.

Review your credit standing

It’s always in your best interest to know what the content of your credit report is. Before applying for a car loan, get a hold of a copy of your current credit report to check if there are errors that can be found. You may just discover that there are some mistaken entries that needs to be rectified, or some damaging information that can be cleared up through phone conversations or letters. Either way, you’re out to gain a better position if you know what is printed in your credit report even before signing up for a car loan.

If you have a spotless and consistent credit

If you have excellent credit, you can take advantage of special incentive financing through the car dealer. If the car dealer is providing an unbelievably low financing rate, carefully read beforehand the fine print of the terms online to be sure you can handle the requirements. A finance rate of 1% is often reserved for persons who have excellent credit ratings and capable of financing a 12-month plan. A 1-2% finance rate is considered a bargain provided you can put up with the terms attached.

If you need a term longer than one year or have an inconsistent credit record

You can do your own financing if you have limited options. Consult with your bank if they offer new auto loans because banks may have special finance deals reserved for their established customers or for those who transact their savings, loan and checking through the bank. You may be able to get lower interest charges with someone who’s familiar with your person.

Search for the best auto financing deal online

On numerous online credit sites, you can send a request for several quotes from local finance companies and lending agencies. Use an online form to submit your request for a car loan, and the website will forward your request to up to four financing houses simultaneously. An agency representative will get in touch with you within a day or two to talk about your loan request and give you interest rate quotes and monthly payment options that are available for you. Searching for credits online makes it easier to compare and choose the most suitable auto loan deals for you.

Your credit is poor but you must have a car

Perhaps one of the best but most often bypassed alternative is to get somebody to cosign the loan with you. More often than not, the finance rate that your cosigner qualifies for can be passed on to you and this will benefit you as you will be charged lower payments per month.