Which is Better? Loans vs Credit Cards

An important thing to understand in the loans vs credit cards discussion, is that credit cards are essentially a monthly loan. Therefore, when you look at personal loan options, it’s best to view a credit card as a type of loan.

How does a Credit Card work?

A credit card is a type of monthly loan. It’s one that a financial institution allows you to prequalify for. You access it by using a bank card. Like any loan, the loan total amount is decided on by the institution. It is called your credit limit and is the total maximum amount you can spend. Every month you are required to pay a minimum balance towards the total amount borrowed. Usually, if your balance isn’t paid off entirely by a specific date, an interest fee is levied. Exactly how this works depends on the bank as well as the type of credit card you have. In addition to any interest levied on money borrowed, credit cards usually have a monthly fee attached to them. Remember – using your credit card is not the same as access to free money. It's a loan that you can use throughout a month, with payment due on a specific day.

The amount of credit you are allowed depends on a number of things. For example, income, past credit card payment history and type of bank account you have. Often banks will offer you an increase in your credit limit if they regard you as a good client. In other words, if you pay your credit card off regularly and timeously then you could qualify to borrow more.

A good rule of thumb is to never have a credit limit above what you earn per month. Don’t decide your limit based on how much credit your bank is prepared to give you. Rather set a credit limit that you are comfortable with and then avoid the temptation of increasing it. Pay your card promptly and remember that in addition to paying back the money, you have to pay the bank charges linked to your credit card. Therefore, factor monthly charges into your budget planning.

How does a Loan work?

There are various types of loans. Personal and business loans are commonly accessed by many people. How the loan works depends on the terms and conditions attached to it. Loans that require pre-qualification look at credit ratings, black listings, employment history and/or what assets you own. Then based on these things, the lending institution will determine how much they will lend you. As well as the interest rates and any additional fees attached to borrowing money from them. The result of this process is that it can take time to assess if you could qualify and then you might not. For example, your options for accessing loans if you’ve bad credit are quite limited and might be particularly expensive.

Loans require a minimum payment per month. The payment goes towards paying off the interest and fees attached to borrowing the money. As well as paying off the principal amount (what you actually borrowed). Ahead of accessing a loan it is wise to know exactly what the end total amount you need to repay will be. You also need to know what the minimum instalments are. If you can pay it back faster than planned. And what and when penalties will be charged. It is also important to know if your assets can be used to repay the loan if you miss paying an instalment.

Gold Backed Collateral Loans

Gold and Gold Jewellery backed loans, like the ones Coughlans offers, are collateral loans. This means that instead of guaranteeing your loan against future income, your loan amount is determined by the value of a gold item(s). This item is kept by the collateral lender while you repay the loan amount. Once the loan is repaid in full, your item is returned to you.

One of the many advantages of using gold as collateral, is that the risk associated with borrowing money is decreased. This is because none of your other assets are able to be seized if you miss a payment. Additionally, due to the nature of a Gold Backed Loan, Coughlans is able to offer easy loan terms with very competitive interest rates. Furthermore, those with bad credit ratings or who are blacklisted can still qualify for a gold-backed loan. Our loans can also be extended to people who are unemployed with no income or without a consistent employment record.

Contact Coughlans today to find out more. Or visit one of our stores to have your Gold and Gold Jewellery appraised for a Gold Backed Business or Personal Loan.