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Pay with a payday loan or credit card?

Would it be better to ask for a payday loan or, not wait, and go out and buy what you need with your credit card? That dilemma has a solution.

The differences between a payday loan and a credit card are important. Yes, it is true, both are financing lines. Both are offered by banks, banking companies and municipal savings banks. Both help you in times of crisis. And both allow you to grow.

The financial decision is to pay for the study or the holidays with your credit card or with the resources you get for a payday loan.

What will be more convenient?

Payday loan or credit card

Let’s review the characteristics of a payday loan:

    • The term can be extended up to 60 months
    • They can lend (depending on the financial entity) an amount that can vary greatly, but approximately $ 75,000 MX pesos, depending on the credit history and the institution.
    • The rates (TIAF) fluctuate between 8% and 31.00% according to the amount and term (data as of March 2019 of the SHCP).
    • You can get a bigger loan by giving a home as guarantee.

Credit cards have these conditions:

    • The term can be up to 36 months (very few offer more time).
    • The quota varies according to the income of the person.
    • Annual rates range from 23% to 151% (data as of March 2019 SHCP)
    • If you already have the card you don’t need approval and you could use up to 100% of the line of credit *.

As you can see, the term and rate are different in payday loans and credit cards.

And that couple of factors is what should guide you to make the decision.

Which to choose

The decision between paying with a payday loan or with a credit card will be based on the answers to these questions:

    • What do you need the extra money for?
    • How much do you need?
    • When can you afford it?

The normal thing is to use the cards in commerce, in retail, in restaurants and bars. People generally “like each other”, spend, consume with cards.

On the other hand, payday loans are widely used for study payments, home remodeling, starting a business or vacation. They are, as a rule, investments.

For example, if you want the money to buy a television, credit card is probably a good alternative. You will pay a higher interest rate, but you could pay it in a few months.

But if what you need are several televisions and computers to start a business, perhaps it is best to ask for a loan. You will pay less interest.

The amount is the second factor to evaluate.

  • If the amount is small, it may not be justified to start a credit approval process (whether online).

Finally, the term.

Finally, the term.

  • If you can pay in a few months, three, for example, and the amount is low, the card will be a good option.
  • In general, our recommendation is to use the shortest possible time to pay the credits.

Less term, less interest, better business.

Other options

Holidays are a good example of how to use both financing lines:

A personal credit will be cheaper.

But buying airline tickets with cards has great benefits, such as medical insurance, car rental discounts or accumulating points and miles.

How about, requesting the loan, with a twelve month term (because it is the time you estimate you will need), buy the tickets with the card and use the credit resources to pay the credit card for a fee?

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The repayment table of a mortgage loan

Knowing the repayment table of a mortgage loan, makes you aware of what is being paid for the debt. The concepts that make up each of the quotas during the agreed term are understood. The balance of the debt is informed at all times to make an important decision.

The table is operated systematically and shows the gradual payments made every month. The detail of each of the concepts that compose it, in terms of capital, interests and others.

Components in the amortization table

To make a depreciation table you must have some elements.

  • The amount of the mortgage loan. It is granted by the financial institution when it approves a loan.
  • The number of payments. It is the term granted on the credit, either in months or years.
  • Interest Rate In accordance with the policies of the financial institution, a percentage is applied to the value of capital. It is the utility that the bank obtains for granting the mortgage loan.

Usually an important element like others is added, which could be insurance. This is added month by month within the value of the fee for the agreed term.

Using the PAYMENT function of the Excel application, you can calculate the monthly payment amount with these variables.

Creation of the amortization table

As mentioned above, the amortization table needs the components to perform the different calculations of the monthly payment of the debt. It shows both the value of interest and the value to capital. In this case, the PAGOINT function is used to calculate interest. This uses the same program of the PAYMENT function, but adds another element to indicate the period number. This calculates the amount of interest to be paid for that period.

When calculating the value of the first period, and verifying that the result obtained is correct, the components can be left as the basis of absolute references. In this way, copying the data for more periods will not vary and the complete table would be formulated.

However, if what you want to know is how much you pay monthly to the capital and know your balance, it is calculated with the PAGOPRIN function.

Therefore, it can be observed that several functions must be used to complete the total amount of a monthly payment. So the conclusion is that the three functions are complementary. The sum of PAGOINT and PAGOPRIN, results in the same value of the PAYMENT function.

In the end, you can talk about a balance that is resulting after each monthly payment, this would be an independent value. It is added by means of a formula by means of macros so as not to be copied every time it is required to obtain a balance manually.