In recent years, the market for consumer loans outside of traditional banks has grown exponentially. Today, there are more lenders as well as a variety of loan options available for consumers to choose from. With such a large number of lenders and credit options, you have to do a comparative analysis of the various offers before making a selection.
The availability of quick loans, credit cards, SMS loans, and other similar products can be a bit of a jungle to navigate. These options make it easy for one to become confused about which loan option is the best. You will find that the interest rates of available lenders vary and this could be as a result of factors like geographical location and lender’s financial strength.
It is important that you check the interest rate attached to a loan offer before applying for one. No one enjoys the feeling that comes with choosing a loan offer now and discovering a better offer when funds from the previous lender have been disbursed. We understand how unfair one would feel and that’s why we have decided to explain when to søke kredittkort (apply for credit cards) or get consumer loans.
Understanding Consumer Loans
If you have an urgent financial need and you have checked around you hoping to find solutions but all to no avail, getting a consumer loan may just be the way out. Consumer loans are a form of credit granted to individuals for a variety of reasons. It takes two forms: secured and unsecured and each type is given based on the individual’s creditworthiness. You can cover business and family needs with this type of loan.
Types of Consumer Loans
The following are some common types:
Mortgages
Mortgages are credit options that allow consumers to buy houses or other properties. You will find that it is expensive to purchase a home outright, as a result of the high cost of real estate. However, a mortgage provides individuals with the opportunity of owning their dream home earlier before they save up to buy the same house.
A mortgage is a secure loan and this means that it requires collateral from the consumer before the application is granted. The essence of the collateral is to protect the lender in the case of a default on the part of the borrower. A mortgage has a repayment term of up to 30 years, hence most people find it very convenient. If you are considering this type of secured credit, then you will need to read up about it to get more information. You can check here:Â https://en.wikipedia.org/Â if you need more information about mortgage loans.
Car Loans
This type of credit helps borrowers purchase their dream car. The tenor for this loan lasts between 2 to 5 years and it requires collateral, just like a mortgage loan. Usually, borrowers are allowed to use their cars as collateral for this loan. The implication of this action is that the car may be seized by the lender, and in some cases, you may be required to pay asset fees.
Personal Loans
This type of loan is more flexible than other types of consumer loans. You will find that, unlike other types that are used to cater to specific needs, this type of credit can be used for different personal purposes. You can use it to offset an urgent expenditure, repay debt, travel, or pay medical bills. The duration of this type of loan is dependent on the lender and the intended purpose outlined by the borrower.
It is important to note that this type of loan can be secured or unsecured. With an unsecured option, you will certainly get a higher interest rate while secured ones require collateral and do not have high-interest rates. The knowledge of this should guide you in making the right decision.
Understanding Credit Cards
Credit cards are payment cards that allow a financial institution to lend money to the cardholder, who then uses the card instead of cash to pay for products and services. This card also prevents your account from being charged right after you make a purchase. This is in contrast with what is allowed with a bank card which is deducted as soon as you make a transaction.
Credit cards allow you to put off paying for goods and services until a later date that is more convenient for you. This is due to a contract between the vendor and the card issuer in which the financial institution pays for products and services directly, while the cardholder pays later.
Reasons to Use a Credit Card
Here are some reasons to consider this option:
Security
In the event that you misplace your wallet, you can deactivate a credit card immediately after you notice this development. If you suspect that your account has been compromised, you can also contact your financial institution to block any transaction until you are sure that everything is fine. You can also read this article to find tips on how to protect your financial accounts from hackers.
Increases Creditworthiness
A large portion of your credit report is derived from your credit card account and payment history. An account with a good repayment history will certainly enjoy a good credit rating. With a good credit rating, you will be entitled to more loans with better interest rates.
Credit Card or Consumer Loans?
Deciding on whether to get a consumer loan or apply for a credit card is dependent on your needs. Consumer loans allow for the disbursement of funds to the borrower to offset their expenditure or even make a purchase. Credit cards on the other hand allow cardholders to get loans up to an agreed maximum. The cardholder may decide to use up to the maximum amount or less, depending on their immediate needs.
Whether to use credit cards or loans depends on a number of things. A loan is the most obvious solution if you require funding for a single purchase of products immediately. If you have a periodic requirement for financing a variety of transactions over time, a credit card is generally a better option. However, each of these options has implications that you need to consider before making a decision.
Conclusion
If you are confused about choosing between a credit card and a consumer loan, then you will find the information in this article useful.
