Posts tagged: bad credit

Signature Loans Vs. Credit Cards

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Signature loans are generally pretty easy to get. It is easiest when you have a good credit history, but not impossible to get when you have bad credit. These type of loans are founded upon a single signature. You do not have to put up any collateral up to get a signature loan. This is one way in which it differs from most loans, including the usage of credit cards.

Which is better?

There are pros and cons to both signature loans and credit cards. Which one is right for you is dependent upon your financial situation and the kind of spending you want to do on credit.

Credit cards

The good thing about credit cards is that you almost ultimately control how much you get to spend on credit. If you have a good credit history, you can qualify for a very large amount of credit. You can choose, within that amount, what your credit limit will be. With signature loans, often times the maximum amount you can borrow is ten thousand dollars. Of course, in some cases, having a smaller limit on how much you can borrow might not be such a bad idea. It all depends on your spending habits and your ability to pay the money back.

The payments you make on your credit card depend on how much you spend. The larger the balance on your credit card, the more you pay monthly. With signature loans, you pay a set amount every month, or even every two weeks. This depends on how much money you took out on loan, but it does not vary depending on how much of that money you spend or what you use it for.

Signature loans

When you apply for a signature loan, there is no requirement of collateral. The thing that they lenders look for is a good credit rating. This assessment alone will determine whether or not you qualify for a signature loan. Once you qualify, all they need is your signature, and you have the loan. Sometimes it’s easy to forget that it is STILL borrowed money, that you must pay back.

Interest rates on signature loans are based also upon the applicants credit rating. It is not impossible to get a signature loan if you have bad credit, but you will better chances and lower interest rates on your loan if you have good credit. With credit cards, a larger variety of people can qualify for credit cards with low interest rates, even if they don’t have great credit ratings. The problem with credit cards is that, usually, if the person has a bad credit rating, they probably will not be able to pay back the money they would owe on a new credit card. Still, credit cards are offered to many people regardless of their financial abilities.
Whether a signature loan or a credit card is best for you depends on how much you want to spend, how well you can control your spending habits, and how well you can make your set payments.