Loan Or Credit Card? How To Decide

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First, you'll need to take a long hard look at your credit history. If you've ever considered just cutting out the middle man and putting CCJ after your name on forms or you've recently been bankrupt then think twice before borrowing at all.

Interest is likely to be high, patience and understanding from your lender is likely to be in short supply and, all in all, if you can possibly save up for whatever it is that'll be a much better option.

If you have a poor credit history but not so bad as that described above you may find that credit card that aren't sub prime are difficult to obtain. In this case, unless you want to borrow a small amount for around a month, you'll be best off to go ahead and compare personal loans.

If you have an average or good credit history there are a lot more options open to you.

Purchase credit cards - that's cards that come with a low APR or a 0% purchases offer - are a great place to start.

0% purchases offers can be as short as a few months but they can last for as long as a year so, if you have access to one of these, and you can get a high enough credit limit on your card for what you need, these are the ideal option.

The problem with credit card is that once the 0% rate is over you'll be subject to a high monthly interest rate so be realistic when you work out your repayments - if you slip into paying interest at a high rate then you may have even been better off going with a

In general, credit cards aren't suitable for paying back debts over a number of years - that is, typically over more than two - for this you should always go to personal loan first.

When you compare credit cards you'll notice that they favour applications from those who appear stable - e.g. those that have lived at one address for a little while, have a set annual income etc. The same is generally true of personal loans.

In both cases you could increase chances of a lender knowing that you're stable by going to one that already knows you such as the bank where you have a current account or mortgage.

If this isn't you there are still a few borrowing options open to you. Community loan site Zopa welcomes applications for unconventional candidates such as freelance workers who may find it difficult to borrow elsewhere.

by: Julia Cook

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