Payday Loan or Secured Loan? Making the Choice

The fallout from the recession of the last few years has left many Americans in a precarious financial predicament. In short, many Americans have been left with substandard credit scores that provide them with very few options when it comes to obtaining any type of credit or loan.

In fact, it was recently reported that nearly a quarter of Americans have credit scores below 600. In case you weren’t aware, a credit score of lower than 600 means that you have a slim-to-no chance of obtaining an installment loan, credit card or personal loan.

The Process of Obtaining Secured Loans

As a result, many Americans are now considering secured loans. A secured credit card is essentially a credit card that is secured using a cash deposit to the creditor. For example, if you choose a secured credit card, you will need to first send the credit card company a deposit equal to your credit limit. A credit limit of $500, for example, requires a $500 deposit.

Although the credit card company will not use your cash deposit to pay your credit card bill unless you fail to do so yourself, it serves as an insurance policy. Subsequently, secured credit cards are a popular choice for individuals with poor or no credit.

Other Options for Fast Cash

However, it is important to point out that secured loans may not be your only option. If you need money fast, applying for a secured credit card wouldn’t help you, as you must first send money to the credit card company. And, as we all know, if we had money to pay for the credit card deposit, then we wouldn’t need money in the first place!

Secured credit cards have their place in today’s society, particularly when speaking of rebuilding one’s credit. In fact, secured credit cards can go a long way to increase an individual’s credit score over time and rebuild a shaky financial history.

Deciding Which Loan is Best for You

However, just as there is a time and place for secured loans, there is also a time and place for a payday loan. A payday loan is similar to a secured loan, as the money is actually borrowed against a future paycheck. However, the biggest difference between the two is that if you are in need of fast cash, then a payday loan is right for you.

Unfortunately, not everyone can afford to open a secured credit card account, and not all of us are able to foresee financial difficulties. In these instances, a payday loan may very well a better option. In addition, like secure credit cards, payday loans do not require credit checks or background checks, thereby making them the ideal choice for individuals who have had a difficult financial past.

In conclusion, you must decide which type of financial option is right for your personal situation. Both secured credit cards and payday loans serve a very useful purpose, so you must decide which one betters suits your needs and wants at any given time.