Social Lending versus Credit Card Borrowing
If you need some spare cash then you might just be tempted to get it form your credit card. Maybe draw out some cash from it or spend on it and not pay it back for a while. It is a very easy way to borrow money and if you already have a big enough credit limit then it does not even involve talking to anyone. With just the minimum balance to pay off each month, it can be an affordable way to borrow money.
However, many people do not do the cost calculations. With paying just a very small amount of money off each month, it means that the loan will go on for a long time. This means that with interest payments being charge each month, you will end up paying back a lot of money. It is worth doing the calculation or finding an online calculator to work out how much you will end up paying. Generally the longer the term of your loan, the more expensive it is.
An alternative to credit card can be social lending. This is where you borrow money off another person, usually at a competitive interest rate. This is very likely to be cheaper than a credit card. You will almost certainly have to pay back more each month than you would with a credit card. However, the loan will be paid off more quickly and you will therefore end up paying a lot less in the long run. Do some calculations and this will demonstrate it all to you. Because social lending often involves an auction where you will choose the cheapest loan, you could end up by making a really significant saving. Often lenders are prepared to charge a lower interest rate than a bank, because they are still getting a better return than they would by investing their money. It can be a really good way of borrowing money cheaply.