Anuj Kakar, co-founder of MoneyTap, said that credit cards can sometimes be dangerous, especially if you fail to pay your bills on time or you only pay the minimum amount.
New Delhi. Emergency situations can occur at any time in a man’s life. Sometimes money is needed suddenly. In such a situation, a person thinks about a credit card or short term loan.
Anuj Kakar, co-founder of MoneyTap, said that credit cards can sometimes be dangerous, especially if you fail to pay your bills on time or you only pay the minimum amount due to which the unpaid amount is due in the next month. It has to be paid with huge interest. Apart from this, there is also the risk of credit card fraud and theft. On the other hand, when it comes to short term personal loans, you can get more loans than credit cards. But there is a screw. The interest rates on these loans are reduced only if you have maintained a good credit score. There are other drawbacks as well, such as prepayment penalty etc.
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Benefits of credit card
Better for small expenses which can be paid through online transactions. Generally, most credit cards come with an interest-free billing period of 30–50 days. It is a revolving line, so it can be used again and again. Most credit cards also offer rewards on transactions, which can be used for cashback, gift coupons etc. Credit card helps for any unplanned expenses. The card limit increases with a good repayment track which is beneficial for the future.
Credit card loss
Most credit cards do not allow cash withdrawal or charge very high fees for this. There is difficulty in controlling expenses through credit card and due to which there may be difficulty in future repayments. Normally, 36-42 per cent interest rate on credit cards is very high and if your arrears are not paid on time, it can prove to be very expensive.
Benefits of short term loans
Short term loans are better for those expenses that require cash or lump sum payment. The amount borrowed and the repayment period are limited, so it controls unplanned expenses. Generally, you can get a larger amount in a short-term loan than a credit card limit. The repayment period of short term loan is 3 to 12 months. More interest is charged on credit card bills as compared to short term loans.
Short term loan losses
Short term loans of less than 90 days should be avoided. This can get you into a debt trap. A short-term loan is a one-time solution, that is, every time you need a new fund, you will have to apply for the loan again and qualify again.
