Bad Credit

Credit card, quick loan or Peer-to-peer lending

In this article we will choose between credit card, quick loan or Peer-to-peer lending, we will see the advantages and disadvantages of one and another form of financing, when one is more effective than another and, above all, which is cheaper and easier to obtain.

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What is a credit card?

A credit card is a financial product offered by financial institutions to facilitate the payment of purchases to their customers and can also be used to obtain liquidity at times when you need it, but the main objective of the entity what is granted is to have you linked to it the better and better way than offering a credit card with which you become more and more indebted, month after month; some customers are so trapped with the credit cards that they “eat” all the payroll in advance, so that when it arrives and the accumulated balance of the card is charged plus the corresponding interest, the client is left with almost no money and has to return to the vicious circle of having to use the happy credit card to be able to spend the current month.

Obviously this way of proceeding is pernicious and has no future, to which the financial institution detects this procedure, usually cancels the credit card with the excuse that the financial product is not designed for that and they are right, sooner or later the individual It will collapse and can not continue, it is better to stop, get a loan and turn around the situation, pay the card, cancel it and go paying the loan little by little until the subject manages to live with their monthly income without having to resort to the happy credit card.

But what is explained above happens to people who do not have much wealth or much savings and income, most people who have credit cards do not see themselves in these extreme situations and use them rationally to pay for their purchases in a postponed or at the end of the month. If you pay all your purchases at the end of the month they do not usually charge large interest, but if you postpone your purchases then it is when you are stuck with a TAE interest of more than 20% on most of them and the same as if you take out cash, which is not recommended, because they charge too much for it and because the amounts that can be taken are small in the order of up to 3,000 to 5,000 € (some credit cards have a higher limit, but usually who has cards of that type – like Gold or Platinum – they do not usually have cash problems).

What is better to get money: ask for a quick loan, take it out with your credit card or request it through Peer-to-peer lending?

Let’s analyze the three possibilities one by one:

1. Request a quick loan.

They are loans of small amount and quick return that are intended for those who need money very urgently and are granted by opportunistic companies that flood the networks, the written media and television, with very striking advertisements with funny animals and even with saving superheroes that will help you get money when the ATM no longer wants to hear from you.

It seems that little is charged but that is because the amounts are very modest of 75, 100 200, 300 €, but when you do the calculation of the APR (Annual Rate Equivalent) applied to your quick loan is when you realize that you have nailed huge interests, interests larger than one thousand percent. (On the Vivus page they give an example and say that for a loan of 100 euros at 30 days, the interest would be 24 euros, which is equivalent to an APR of 1270%) but we have come to see cases of annual interest charges of 3000% and even double.

And do not delay, because if you do, they charge you big fees for non-payment and for delay, which in the end make the cost of the loan very expensive. (In Vivus they warn you that if you do not pay you can be charged a penalty for non-payment and arrears that would be 1.00% daily on the unpaid amount and with a maximum limit of 200% on the principal, as well as inflate you to calls and include you in the records of delinquent type bank). Some examples of these companies that grant this type of quick loans are Cetelem or Cofidis, Kredito 24h, Wonga, Vivus, Que bueno, to name a few.

2. Obtain the liquidity that we need via credit card.

Credit cards are Revolving credit lines that can be reused again and again, once we have paid our fee.

Some credit cards are free to maintain and allow you to get fresh money instantly; some credit cards do not charge you anything if you have a payroll there and even allow you to withdraw money without commission costs in all ATMs in Spain. They also allow you to postpone your purchases until the following month without additional charge or in several installments with interest of the order of 10 to 20%.

Also if you take out money in cash, and return it the following month, they do not charge you interest either and this can also be postponed and returned in several installments paying just over 10-15% of annual interest although, in some cases, more is charged, up to 20% or more, so you have to be aware of the particular conditions of each credit card in question. To conclude, some of the most well-known cards are the Barclaycard VISA, the ING Direct VISA or the Banco Popular-e, for example.

3. Get the money by requesting a loan through Peer-to-peer lending.

This can be a good solution to obtain financing because the financing by Peer-to-peer lending is cheaper than traditional financing, they do not charge anything for the solvency study, nor for publishing the financing request in your Marketplace.

They do not charge anything for early repayment, nor do they force you to hire other financial products (insurance, pension plans, cards) as an indispensable prerequisite for being granted financing.

The amount and the repayment term is set by the sponsor requesting financing, the Peer-to-peer lending company will only advise you on what is best for you.

And finally ask for a loan by Peer-to-peer lending is very fast to request and process, the most complicated is the solvency analysis phase, but if it passes without problems, the rest is very simple and then publish your request for funding in the Marketplace and already when the investors have already subscribed 100%, the Peer-to-peer lending company will take care of everything else: to sign the loan contract, to transfer the money and to collect the fees from the borrower and deposit them to the investors and all online.


Elena Baker