Are you short on cash and need to borrow right away? Or maybe need extra funds for renovating your home? You’re probably wondering whether you should use your credit card or simply take out a loan.
A credit card is typically used for shopping and/or buying items that you instantly need. For every time you swipe your credit, you can earn points and get discounts plus other benefits in your next purchase.
Learn how you can better manage your credit card here.
Loans, on the other hand, don’t work that way. Most people think of taking out a loan when purchasing their first home, car, or paying up their debts, bills, and hospital expenses. For these situations, you can either go for a personal loan, or a payday loan. But what's the difference between the two?
A personal loan is the amount of money you borrow from a lender, and then repaying the loan in equal repayments over a period of time, usually between 2 to 5 years depending on the amount borrowed and interest rate. Taking out a personal loan can be much cheaper than using a credit card simply because personal loans offer lower interest rates, and they can be paid back even before the scheduled payment.
What’s great about most NZ-based lenders is they allow unsecured loans, making it easier for borrowers to apply and take out the money they need. Similar to other kinds of loans, an unsecured personal loan is the amount you can borrow without showing security on the debt. Your lender would only need your identification and assign you with an interest rate varying from 6% or up. Harmoney NZ offers the lowest unsecured personal interest with only 6.99%.
A secured personal loan, on the other hand, is where your lender requires security, typically backed by personal assets like a vehicle, home, or any valuable item you own. These properties will serve as collateral in case that you fail to pay off your loan.
There can be several reasons as to why you should take out a personal loan. By the term itself, it’s a borrowed amount that can be used for personal expenses. These personal spending however should be limited only to circumstances where you necessarily need it. Personal loans in NZ can go from 6% up to 12% based on your current creditworthiness.
You can use your personal loan in the following situations:
You can have as many personal loans as you want. There is no law limiting you from applying for multiple personal loans in New Zealand. However, lending companies have certain limitations when it comes to the amount of money that they can lend you, and sometimes ask you for your credit profile if need be. Remember why you applied for a loan in the first place. To help you out, here are some things you need to take note of and questions you can ask yourself before taking out a personal loan.
Payday loan is a short-term loan where a borrower is subject to high interest rates based on their income. It is likewise referred to as “cash advance” loans which should cover you until your next paycheck arrives. So far, New Zealand hasn’t come up with regulations about payday loan rates. If you're unaware of the consequences (e.g. establishment fees and other hidden charges) that come with your payday application, you should consider researching lending companies and their respective fees and interest rates.
If you need the money ASAP, you can opt for a payday loan only if you’re certain that you can commit to paying an extremely high interest rate. Another reason why some individuals are enticed to get a payday loan is because there's no credit check needed, so if you currently have a negative credit score and would like to take out a loan, you can go for a payday loan instead. You can find different lending companies that offer payday loans such as Advanced Cash, Smart Cash, and Cash relief.
Payday loan options to consider:
If you need the money right now, you can consider applying for a payday loan. But, if you can wait a little longer, it’s better to stick with a personal loan. With all the fees and numerous charges in a payday loan, it’s possible that you will need to take out another loan just to pay off your current one. Although some people use this as a last resort, it’s not the wisest move, especially when you have debts and expenses piling up.
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