With a charge card, you are obliged to pay the bill monthly bill in full. The issuer is thus providing you with a really short-term loan. Charge cards are great if you want the convenience of card payments but without any longer term line of credit. Most charge cards will not charge you any interest at all.
With a credit card, you will get a monthly bill but you are not obliged to pay it in full. As long as you make at least the minimum payment each month (as stated on your bill) you are not in default. You will be charged interest on all the remaining debt. How expensive this type of debt will be depends on the interest charged, any fees, the size of the debt and how long you keep pushing it before you pay it off. Using a credit card for a short term loan can be financially sound if you actually make it a short-term loan and pay if back quickly. Also, it is very important to keep up with the monthly payments because if you fail to make at least the minimum payments the credit card issuer is allowed to hike up the interest rate for your debt.
Checking account credit
If you have a checking account and need a short-term loan, you can contact your bank and see if they are willing to attach a line of credit to your checking account.
The SMS loan is a convenient short-term loan since you apply for it by sending a text message from your mobile phone, but you should be aware that SMS loans tend to come with hefty fixed fees. SMS loans are normally not paid back gradually over time. Instead, you will be obliged to pay back the loan in full, including interest and fees, with a one-time payment. If you don’t pay back on time, you can expect a significant late fee and an increased interest rate.
A traditional payday loan is a loan that must be paid back in full (with interest and fee) on your next payday. It is not unusual for payday loan lenders to require a post-dated check from you when you receive the loan. If you don’t pay back the loan on your payday, the lender will cash in the check.
At first glance, payday loans might seem like a good idea since they tend to have low interest rates. However, this is outweighed by the fact that they normally come with a big fixed fee. Since payday loans are really short-term loans (and tend to be small), even a super-high interest rate wouldn’t give the lender much money. A fixed fee is more beneficial for the lender since it means that the lender will make a nice profit even on a small loan that is paid back quickly.
If you need a short-term loan, offering a valuable object as collateral will usually give you better terms than payday loans, SMS loans and similar. An added bonus is that pawnshops, in most parts of the world, do not report you if you default on your loan. Defaulting will therefore not harm your credit score. However, if you default the pawnshop will sell your object to reimburse themselves.
Many pawnshops double as second hand stores. If you are in a pinch and need money quickly, selling the valuable object instead of pawning it can be a better solution, especially if you are not 100% sure that you will be able to pay back a loan (including interest and fees) soon.
Peer-to-peer lending (P2P)
On a peer-to-peer lending site, prospective lenders can find borrowers. On many P2P lending sites, the lenders will “compete” for borrowers using a reverse auction model for interest rates.
Peer-to-peer loans are usually unsecured loans. Most P2P lending sites charge a fee from the borrower when the borrower receives a loan. In exchange, the P2P lending site will handle all the administration. The lender will not send any money directly to the borrower and the borrower will not make any payments directly to the lender. The lending site acts as a intermediary.