5 Loan Alternatives to Using Your Credit Card
Credit cards can be helpful tools for everyday purchases. They can help you to manage your finances and can allow you to spread the cost of bigger purchases. When used responsibly, they can help you to build credit history as well.
But there are times when you may not want to use your credit card. Sometimes, there may be a better alternative that you can use. One of those situations where it might make sense to forgo your credit card is when it comes to making large purchases. Credit cards tend to have high interest rates. They also generally have a lower credit limit, and since experts recommend keeping your credit usage relatively low to avoid damage to your credit score, it makes sense to use a different source of funding if your card’s balance is starting to creep upwards.
Fortunately, numerous alternatives can help you get around these credit card limitations. Here are five loan alternatives, including cash advances, pawnshop loans, and title loans, that you can use instead of a credit card.
1. Cash Advance
A cash advance is a short-term, small-dollar loan that allows you to access money quickly and easily. One of the great things about this type of loan is the speed at which the loan is processed and how quickly you can get the funds. With these loans, you can fill out an application in just a few minutes, providing any personal and financial details needed. If approved, you can often receive funds the same day you apply.
Cash advances typically last two to four weeks. When the loan is due, you can either pay the balance or roll over the loan for a fee. But be careful about rollovers, because doing this too much can cause you to get stuck in a rollover cycle. Be sure to budget for cash advance repayment to reap all the benefits and avoid paying more in fees.
2. Line of Credit
Lines of credit are revolving credit, like credit cards, meaning you can borrow up to a specified credit limit and repay at your leisure. You’ll only pay interest on what you borrow.
Lines of credit tend to offer higher credit limits and lower interest rates than credit cards. These can make them better than credit cards for large ongoing expenses, such as home renovation or emergencies.
3. Pawnshop Loan
Pawnshop loans are quick loans available at pawn shops. They don’t require any credit checks and have quick applications. These loans require a valuable item such as jewelry or electronics as collateral.
If you can’t repay the loan, some pawn shops may let you roll over the loan for a fee. Otherwise, the pawn shop will keep your item, but you’ll pay no extra fees and won’t risk credit damage. This type of loan can work if you need to borrow money and don’t want to put your credit at risk.
4. Title Loan
Title loans let you use your car title as collateral if you own it outright. With a title loan, the lender inspects and appraises your car, then offers you a percentage of the car’s value, often between 25 to 50%.
If you accept, you get the loan and can continue driving your vehicle while repaying the loan. In many cases, the loan will be due in 15-30 days.
Car owners who own their car free and clear may prefer to use a title loan instead of a credit card if they want a more predictable repayment.
5. Installment Loan
Installment loans are lump sums you can borrow and repay in fixed monthly payments of principal and interest.
Personal installment loans are generally available in larger amounts than most credit card limits and charge lower rates. The higher borrowing amounts and predictable monthly payments make these types of loans excellent options for loan refinancing and large purchases, such as furniture.
You Have Plenty of Loan Alternatives to Credit Cards
Credit cards can be useful, but they don’t work well in all situations. Fortunately, there are many alternatives you can consider. Cash advances can work well for emergency expenses or situations where you need last-minute funding. Other short-term options include title loans for people who own their vehicles outright and pawn shop loans for anyone with items they’re willing to risk as collateral. For longer-term needs, you could go with a line of credit or installment loan. A line of credit could be a decent option if you have a larger ongoing project that requires revolving credit, like a home renovation. Meanwhile, an installment loan can work better for fixed purchases, like new furniture.
Before you use your credit card, consider whether one of these loan options could serve your needs better.
