American politician and businessman Gavin Newsom once expressed his thoughts on the uncertainty of life. He said, “I feel we are well prepared for a disaster… but the reality is you can never be prepared enough. Never.”
In today’s time, it has become essential to have an in-depth understanding of financial wellness. The working class, predominantly composed of Generation Y, is seeking multiple ways to generate passive income. Despite extensive preparations, unforeseen urgencies can lay the best of efforts to waste. Acquiring conventional loans is a tedious process. They also bring along the burden of repayment which wears you down. Instant loans and credit cards are popular choices during financial emergencies. There a few considerations, however, that must be kept in mind when deciding.
#1 Ease of Use
During a financial crisis, it is essential that you do not constantly borrow money, with the interest rate drastically fluctuating each time. Inefficient money expenditure should not lower your credit score. While there may be a temptation to use a credit card at your disposal, it is important to remember that these have higher as well as variable interest rates. On the other hand, instant loans tend to offer lower and fixed interest rates. Timely payments of personal loans allow you to lower your available credit percentage and thus boost your credit score.
Banks expect timely payments which you may fall behind on, owing to variable interest rates subject to market conditions. This irregularity disrupts the repayment plan you would have formulated.
#2 Quick Access Without Consequences
Traditional bank loans require collateral. This makes access to money difficult if you do not have the required collateral. Moreover, in case you fall behind in payments, the bank will report you to credit bureaus. This will impact your credit score drastically affecting your ability to obtain subsequent loans.
A credit card provides quicker access to instant money than personal loans. The downside is that credit cards urge you to spend frequently. In this way, you will never be able to keep track of your debt and, in the long run, you’d find yourself trapped in a debt cycle. This can lead to a lower credit utilization ratio and ultimately harm your credit score. Furthermore, credit card users are no strangers to additional fees.
Today it is no longer tedious to take a fast instant loan online as it was previously. Now, there are many online loan apps and lending portals that offer instant approval on cash loans within 3-5 days. In case you require a particularly instant loan approval, online lenders might approve it within 24 hours.
#3 Multiple and Varying Needs
The maximum credit limit for both credit card and instant cash loans is based on credit scores. The deciding factor is repayment tenure. Since the interest rates on a credit card are high, it is advised to use it when the requirement is small and thus can be paid off quickly. Dragging credit card payments for a long period can burn a hole in your pocket. Similarly, failure or delay in payment of your bank loan instalment leads to a drastic decrease in credit score. Quick instant loans are better for larger requirements and have a set term payment. The monthly payments are higher and distributed over a long period of time.
The Better Option
Considering all the factors, it is clear that for Generation Y, taking an instant loan is a better option. These allow for multipurpose usage with minimal interest rates. Instant loans also allow for less spending when compared to credit cards. Unlike traditional bank loans, instant loans can be obtained without any form of collateral. Moreover, digital lending platforms have made the gaining and repayment of instant loans flexible, easier, and faster. Check out EarlySalary to get started!