Knowing which types of bad credit cards are available on the market is an important step in acquiring a credit card. Each card will be aimed at a different section of society, whether it’s students, retirees or low or high income earners, and will have varying terms attached accordingly.
It is important to put in the time and research to explore the options open to you and find the credit card that fits your particular situation. The terms and conditions of a particular card should suit your needs. If you’re looking for your first credit card this is especially true, as it may prove more difficult to be accepted without a history of responsible borrowing.
Keeping your bank and credit card statements organised safely and effectively is vital to ensuring responsible use of your credit card. You never know when you may be required to check the details of your accounts or be requested to provide such information. A record of all your accounts and cards will make this both quicker and easier.
Most fees attributed to credit cards can be avoided by taking careful note of the terms and conditions of your contract and planning around those. Avoiding late fees can be achieved by budgeting; this will ensure your ability to make payments on time.
Some fees may be unavoidable, but these are part of the informed choice you should make when applying for credit cards. It is important to take these into consideration and plan ahead for their payment.
By paying off the minimum amount each month, you can save yourself from various fees. Those who choose to pay off their balance in full each month can also reduce the risk of exceeding their credit limit, thus reducing the chance that they will incur fees associated with this.
Some cards will reward you for your continued efforts to pay off your monthly balance. This may be in the form of loyalty points or air miles, and provide a welcome reward for responsible credit card use.
Having the little voice of temptation in your purse or wallet makes it much easier to overspend. If you don’t carry the card with you, there is less chance that you will put make unnecessary purchases. Of course there may be times when you need to use your card, but by not carrying it around, you will be making considered decisions rather than acting on the spur of the moment.
If you have no money in the bank, it’s OK to use your card as an emergency fund. However, this means using it to pay for urgent expenditure that you cannot afford and desperately need – like a new boiler or getting your car through the MOT. It’s not there to buy a new pair of shoes!
If you have great credit, try and only use a card which offers a 0% interest rate. In the current economic climate these are only being offered to borrowers with a whiter than white record so if you get declined, you are in good company. Just remember that even though there is no interest, you still have to pay the money back so it’s not free rein to go wild.
If you are lucky enough to qualify for either a 0% or reduced rate of interest, don’t breach the terms. This will cancel out the special rates immediately. And when the introductory period expires, look around for another lender offering a competitive deal and cut your current card up; rates often jump exorbitantly afterwards.
Although you should keep spending on your card to a minimum, if you do have to use it and don’t have a 0% interest option, a reward or cash-back card may offer an alternative. Spending on a credit card is rarely a good idea but if you have to do it, at least earn yourself some cash or benefits at the same time.
If you know you will struggle to be disciplined with yourself, ask either your partner or a trusted friend to look after the card and grill you if you ask for it. The idea of facing an inquisition might be enough to deter you from binging unnecessarily.
Remember that one of the main benefits of credit cards is that they protect your purchases – and this means they are the perfect form of payment when booking holidays or paying for expensive electrical items.
]]>It happens to the best of us and it is certainly nothing to be ashamed of but when you are facing a bit of a cash crisis, where should you turn to get the best deal on a short term loan?
In this article I am going to walk you through the 5 main options that you have open to you. I’ll try to give an honest overview of their various pros and cons and guide you to the option that best suits your needs. I’ll try to include relevant information on rates of interests, fees and charges and give representative examples of how much you will repay over the term of the loan.
So, let us begin.
Credit unions are not-for-profit organisations that typically cater for savers and borrowers in a particular geographical location or profession. They are now starting to offer short term loans to their members as an alternative to the more expensive options detailed on this page.
Some will require you to already be a member and have some level of savings before they agree to a loan, while others will carry out some background checks before lending to ensure that you are able to repay what you borrow.
The rate that a credit union can charge on a loan is limited by law to 3% per month which works out at an APR of 42.6% but typically they will be just 1% per month (12.7% APR).
We would always recommend that you start you search for a short term loan at a credit union and you can find out where you nearest one is using the aptly named website Find Your Credit Union.
As the most well know and the most widely advertised of the short term loan options, payday loans have become a common feature in society but the have not been without their scandal. There have been warnings from many bodies responsible for family finance advice, primarily because of the very high typical APRs applied to the product.
There is a good reason for this though – the purpose of such loans is usually to cover a very short period where an individual requires quick extra cash and the loan is typically unsecured. The name “payday” comes about because that is what most loans are for – to cover outgoings between now and the next payday of the individual.
Well it depends on the institution you borrow from but one of the market leaders, Wonga, have a representative APR (annual rate of interest) of 4214% but because you can only borrow the money for up to 30 days the actual monetary values look more reasonable.
At the time of writing, a £400 loan from Wonga for a period of 10 days will leave you with £445.49 to repay in total over the term which is 11.37% in interest.
I believe that looking at things this way actually makes payday loans look a bit more reasonable.
Short term payday loans are best for: people who require fairly small loans at very short notice as decisions can be instant (mostly online with no need to fax documents) and the money can be in your bank account in as little as 15 minutes.
There are a few operators in this market which differs quite significantly from more traditional payday loans. With cheque based loans, the borrower is required to send a copy of a cheque guarantee card along with a few blank cheques that the loan company use as collateral should you fail to repay your loan in the period agreed upon.
The benefits of this type of service is that you generally benefit from much lower representative APRs meaning the overall cost of borrowing is less.
For example, at the time of writing, Mister Cheque offer a representative APR of just 295.74% which is a great deal cheaper than the Wonga example stated earlier.
Some companies also allow you to complete the process without any credit check which can be great for those with bad credit ratings or CCJs.
The cons are clear though, because you have to physically post documents to them, the cash is unlikely to hit your bank account for at least a day (assuming you post them first class). The extra effort required on your part is reflected in the lower rates though.
Cheque based payday loans are best for: those who can afford to wait a day or two for the cash to hit their bank account.
Security statement: a Log Book Loan is secured on your vehicle.
This type of credit is provided to those who have a car or other vehicle against which to secure it. Since this loan would be secured against your vehicle, if you fail to keep up the payments, you are at risk of having your vehicle seized and sold to repay the remainder of your loan.
The downsides of this type of loan are clear – you can lose your car.
The advantages of this type of loan are that you can get a larger loan in comparison to the previous 2 payday options (up to £50,000) and that, because the loan is secured, you do not have to undergo any credit checks.
A representative APR for a logbook loan is 478.30% which is by no means the lowest rate you can achieve but with repayment windows ranging anywhere from 1 day to 48 months, you can at least schedule the repayment for further in the future if you should wish.
Logbook loans are best for: people who require slightly more credit that a typical payday loan can provide and that have a car that they can, if the worst comes to the worst, managed without. For those people who are unemployed or who have bad credit, this option allows you to get a loan thanks to the security you are putting up.
If you use your vehicle for work purposes of consider it vital to everyday life, a logbook loan is probably not for you.
The pawnbroking industry has been seen on our high streets for many years but in recent times it has gone online too. Now you can complete the whole process online if you should wish with companies such as Borro.com.
The principle of pawnbrokers is that you exchange your valuables in exchange for a loan with a valuation agreed upon by both parties. The valuables are then held as security against that loan in the case of non-payment on your behalf.
With online services, you can pawn items ranging from jewellery and watches to art and even cars. Any item of significant value may be considered as security by the pawnbrokers. The security means that no credit checks are required.
Services such as Borro.com tend to lend on a month-by-month basis with interest rates dependent on the loan. At the time of writing, Borro.com are offering a 6% monthly interest rates on loans up to £999 which is an APR equivalent of just 85% which is much lower than other services reviewed in this article.
So the obvious pros are that the interest rates charged tend to be much lower than other short term loan options and there are no credit checks.
The biggest con is that you have to give up possession of your valuables for the period of the loan. And if you are unable to repay the loan then you will lose those valuables. You are also are the mercy of the pawnbroker when it comes to the valuation of your valuables and you might not get realistic market value for them.
Another con is that the items have to be handed over before the loan reaches your bank account so it’s certainly not as fast as some of the other options displayed here.
Pawnbrokers are best for: people who have valuable items that they are willing to put up as security in return for better rates on the short term loans. As with logbook loans, because of the security you are putting up in the form of your valuables, people with bad credit histories, CCJs or who are unemployed are still likely to be accepted. Furthermore, loans for people on benefits are not out of the question either.
If you want the lowest rates – speak to your local credit union
If you need cash fast – go for a traditional payday loan from Wonga.com
If you want relatively low rates and have something of value to use as collateral – pawnbrokers such as Borro.com are you best bet
If you want relatively low rates but can wait a day or two – a cheque based payday loan from Mister Cheque might be appropriate
If you want larger cash sums and have a vehicle to secure against – a Logbook Loan is the way to go
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