The question of the advisability of obtaining a loan is regularly asked by a large number of people. This is quite logical, since obtaining a loan is a relatively simple and fairly quick way to obtain financial resources directed to the purchase of any goods or services, which are practically unrealistic to pay without attracting borrowed funds. Of course, it looks profitable and attractive, especially if there are no effective ways to preserve and accumulate your own funds. However, when deciding to get a loan, you need to understand its implications. They are connected with a serious increase in the financial burden on the borrower, who will have to give a significant part of the income of the credit institution within a certain period of time. It is important to note that the more serious the purchase is, the greater the load will be.
There are many ways to borrow money from a bank. The most popular ones are to get a loan or get sign-up bonus credit cards. People who rarely use banking services will not always be able to answer the question: “What is better to take – a loan or a credit card?” It all depends on the circumstances and the situation in which the loan is issued.
Features of obtaining a loan from a bank
The loan is issued for specific purposes. The bank will immediately ask you where you plan to spend the money, and, depending on this, will offer you a specific loan product. The loan is issued for a specific period (for example, 1-2 years) and can be prolonged with the mutual consent of the bank and the borrower. The interest rate on it, although it is negotiated, can change (if the contract provides for a floating interest rate).
Sometimes, when applying for and repaying a loan, the borrower has to pay various additional payments and commissions, which can increase its cost. As a result, the effective interest rate, which takes into account all expenses, may be higher than the declared one – the one that is displayed in the advertisement. But the effective interest rate should always be reflected in the loan agreement. Therefore, before signing it, you must read it carefully.
The loan can be provided both in cash and in non-cash form. Finally, when applying for a loan, the amount that the borrower receives is always rigidly fixed. And he starts paying interest from the next day of using it. To avoid problems, the monthly loan payment must be made on time. And it is better to do this a couple of days before the settlement date, in order to take into account possible delays in crediting them to the desired bank account.
Benefits of a credit card
A credit card is a more “free” type of credit. It enables the client to use borrowed money at his own discretion, making many small and medium purchases. Their number and size are limited only by the credit limit, which the bank sets individually for each card.
In the case of a credit card, the client pays for the use of only the part of the money that was actually spent. If borrowed funds are not used, then nothing will have to be paid.
An indisputable plus of a credit card is that a loan on it can be completely free. Each credit card has a so-called grace period. It usually lasts 30 to 90 days. If you manage to pay off the debt on the card before it ends, then the bank will not charge you interest for using the credit money. And, if the debt is always repaid on time, then they can be used an unlimited number of times. The credit card will remain active until it expires. After that, it can be reissued and used further. Of course, if the bank has no questions about your payment discipline.
A credit card can become your financial insurance abroad in unforeseen situations. It is unlikely that it will be possible to issue a loan there, but it is quite possible to use part of the funds from a credit card for settlements.
But it also has its own nuances. If the bank for some reason doubted the financial reliability of the client, it can unilaterally, at its discretion, reduce the credit limit for him or even deprive him of it altogether. This happens infrequently and, as a rule, unexpectedly, but such an option cannot be ruled out.
Which is easier to take – a loan or a credit card?
You need to provide a large number of documents for applying for a loan at a bank: a passport, an individual taxpayer number, a certificate from the place of work, a certificate of income for the last 6-12 months, and much more. The more money the client expects to receive, the longer the list and the more complicated the registration process. In addition, different types of loans have their own nuances. For example, when applying for a mortgage or car loan, you will have to additionally conclude a property and life insurance contract.
Everything is much easier with a credit card. In order to get it, a passport and TIN are enough, and the process of agreeing a credit limit does not exceed one hour. This is if the client has no problems with credit history.
If you need a relatively small amount of money that you can quickly return, then it is better to get a credit card. Preferably with a good grace period. If the amount is larger, and it will not be possible to return it quickly, there is only one option left – a loan.