How do credit cards work as an alternative to a short-term loan?
If you take out a credit card as an alternative to a short-term loan, you may be able to cover your short term loan borrowing needs by paying for things with the credit card rather than a loan.
With a credit card, you can choose to pay off your balance in full, or spread the cost of borrowing over a longer term. As long as you are making at least the minimum monthly payment you can pay off your balance in several smaller repayments, or in a larger lump sum repayment. It should be remembered however that spreading the cost of borrowing over a longer term will result in higher interest payments overall and you should always try and pay more than your minimum payments where possible.
Short term loans tend to be unsecured, meaning you aren’t required to secure your loan against an asset. A credit card shares this similarity with a loan too.
Furthermore, short term loans can be ‘no guarantor loans'. Simply put, there isn’t a need for someone to act as a guarantor if there are any defaults on payments. Though guarantor loans are available, with a credit card, there is no need for a guarantor either.
Therefore, although a loan and credit card differ in how they operate, they also share similarities too.
Can I apply for a short term loan alternative with bad credit?
Bad credit can be described as having a less than perfect credit score. Your credit score is important as this is one factor lenders will consider when you apply for credit. Generally, people with a bad credit history do have limited access to lines of credit and can be considered higher risk.
Although they are two different products, very often when searching for short term loans, you’ll likely come across payday loans. This type of loan shares many common traits with a traditional short term loan but they are different. They can both be very high interest loans aimed at those with limited or bad credit. However, they can differ on the basis of the loan duration as traditional payday loans are often repaid in full by or on the next payday.
So if you have an adverse credit history, you may be thinking ‘short term loans for bad credit’ or payday loans are the only option. However, there are other options available. Some lenders, including 118 118 Money, do consider applications from people who may have poor or limited credit history. We should clarify that we aren’t a payday lender or a bad credit short term lender, however.
If you’re considering a 118 118 Money Credit Card as an alternative to a short term loan, you can use our eligibility check option. This lets you find out if you’re likely to be accepted for a credit card without impacting your credit rating.
Choosing the right short-term borrowing solution for you
At 118 118 Money, we make borrowing money a thoughtful and transparent process.
We look at more than your credit score and understand that unexpected expenses happen – this is why we are as flexible as possible around your specific financial needs. If you are worried about your credit score, you can try our eligibility check. This means you will know your likelihood of acceptance before you apply for a credit card with us, and it won’t impact your credit score.
Our credit cards have no upfront fees, and no hidden fees, guaranteed. Our online application form accessible on your laptop, mobile phone or tablet is very straightforward. Our eligibility check also lets you know what guaranteed credit limit we’ll offer you before you apply.
Should I consider a credit card as an alternative to a short term loan?
Before you make a loan application, you could consider a credit card instead. Credit cards as an alternative to a short term loan can be used to cover unforeseen emergencies such as a car repair bill or for unexpected bills which could leave you short on money to pay for other necessary commitments or costs.