Credit cards have become widely available to the majority of people, regardless of their financial circumstances. This means that they have become pretty common among banks and financial institutions whose entire business revolves around lending to customers through a credit card.
There are many types of credit cards available for people with good or bad credit history. But borrowing money can often be tricky, especially if you’ve previously had issues after failing to repay on time. This is a big reason why different types of credit card may not be good alternatives for you.
If you’re still looking to borrow money but without the intervention of a credit card, we’ve narrowed down the best alternatives that you may want to consider.
Personal Loan
Let’s say you want to pay off your dream holiday or make necessary home improvements, but are lacking the finances to do so. This is when you might want to consider applying to get a personal loan with loan places in Racine, WI.
If you can secure an attractive interest rate, it may work out cheaper for you to take out a personal loan than to use a credit card. Not only does this make the debt more manageable than having to pay off multiple credit cards at once but it means that you, the borrower, will be paying much lower interest on the debt than with a credit card.
While the amount you can borrow and the rate of doing so depend on your circumstances, you’ll need to keep an eye out so additional costs including early and late repayment fees don’t significantly impact the cost of your borrowing.
Short-Term Loan
Also referred to as a payday loan, a short-term loan allows consumers to borrow a smaller amount of cash for a short period. For example, if your car has broken down and you are struggling to pay your usual bills, this type of loan might be the exact financial boost that you need.
Even people with bad credit can apply for one of these loans which provides the necessary funds so life can go on as normal. As convenient and useful as it is to take out a short-term loan, taking out multiple can be a recipe for complete disaster due to the higher interest rate.
If you truly want it to be an ideal alternative to a credit card, make sure to pay it off immediately before you get yourself into more debt!
Secured Loan
A secured loan will generally allow you to borrow more than a standard credit card which is ideal for individuals who want to use the money for certain things like home improvements or to pay off a wedding.
As its name suggests, this type of loan is secured against an asset. For instance, your mortgage is secured against your home or the car that you own. This is a simple way for a lender to guarantee that they will not miss out if the loan is not fully repaid.
A downside is that these loans can generally be pretty risky. If you were to secure against a mortgage, your home or car might be repossessed if you cannot keep up with your loan repayments.
Guarantor Loan
A guarantor loan is a great option for individuals with a less than stellar credit history, who cannot be approved for a personal loan. It requires another person – usually a friend or family member – to step up as a guarantor for the loan, meaning they will cover repayments if the customer fails to repay.
Debit Card
If you don’t want to use cash, maybe the most obvious and convenient alternative to a credit card is a debit card. It’s also great at offering consumer protection so you can shop around safely and securely. You will receive this card if you have a current account with a banking institution.
One of the greatest advantages of a debit card is that it can be used over the phone, in-store, and even online to make an array of purchases. Plus, you can only spend the money that you have – meaning you won’t get yourself into any unexpected debt while using a debit card unless you have a pre-arranged overdraft.
PayPal
Paypal is a convenient service that allows you to transfer money to friends and family, pay for goods in a restaurant or shop, and even issue some invoices for a business.
The application offers a dispute resolution service for all customers which amplifies its overall consumer protection and its effective approach to fraud prevention. This means that if there are any problems with the purchase you have made, or a purchase ends up being fraudulent, Paypal is happy to resolve the dispute immediately.
However, there are some limitations with Paypal. Notably, depending on where you are and what you are buying, you might not have the option to pay via Paypal.
Overdrafts
In terms of borrowing money, your bank is the first place you should look. If you need some extra money for the short term then applying for an arranged overdraft as part of your current account might be exactly what you need”
An overdraft allows you to withdraw money up to an agreed amount when your balance dips into negative figures. Some overdrafts will charge additional interest so you must make yourself aware of these extra costs before agreeing to anything.
Arranged overdraft interest rates are fairly high. Though it may appear to be a convenient way of borrowing money in a fix, it’s likely not going to be the best alternative to having a credit card unless there is a 0% deal in place!
Summary
Hopefully, after reading this article, you’ve discovered the best possible financial alternative to using a credit card. The best part about any of these options is that they can be tailored to fit your exact needs, making it much easier to find a suitable alternative for whatever it is that you are looking to pay for.
Hey Guys! My name is Richard Andrew. I am a contributor to the Strategy Watch. I have finished my graduation with a major in Economics. My interest areas are Economics, Financial Analysis, Stock Analysis, and Business Strategy.