Why you need to shop around before taking out a loan or credit card

Most of us are still feeling the impact of the credit crunch and the claws of the ongoing recession continue to tighten. For many, this means reining in the finances wherever possible but, for others, it can mean an unpleasant peek into the world of debt. Credit cards and loans can offer a lifeline in times of need but, as with any financial product, the best advice is to shop around and find the deal that is best for you.

The Loan Arranger

Either way you look at it, credit cards and loans are both methods of borrowing money. While they may offer some short-term breathing space, the important thing is to have an eye firmly fixed on the future and how realistic it is that you’ll be able to make repayments on time. In the current climate, lenders and credit card providers have become a little more circumspect about lending money, making it just that little bit harder to find good rates of interest. However, that alone is part of the reason to do some homework.

Possibly the first thing you need to sort out is which route to take: card or loan?

Loans can be for any sum up to around £25,000. Repayments are agreed in advance, so that you know just how much you’ll be paying back and when. This allows you to structure your finances around these figures and make the most of what you borrow. However, the rates of interest attached to loans tend to be relatively high, so they are generally only worth taking out if you need a large lump sum or are buying something specific.

Credit cards give you the option to borrow when you need to but, in comparison to loans, offer much smaller sums. They come into their own when it’s time to bridge the gap between pay day and an unforeseen expense or a medium-sized purchase. In addition, credit cards come with protection against retailer insolvency or faulty goods.

What’s the Interest?

Regardless of the route you take, you’ll need to do some homework. The loans marketplace is a competitive one and each company and card provider has its own deals and perks. What is most important to you is deciding just how much you want to borrow and just how much you want and can afford to repay.

While this may sound complicated, the research you put in can help you in the long-term. Using online comparison websites is a quick and simple way to get an at-a-glance run down of just who offers what. These sites are independent collators of data, giving you an unbiased overview of the deals and terms that you can get. In addition, it’s worth checking out whether you can get any more favourable deals from your bank. As an existing customer, you might be entitled to benefits that aren’t available to the man on the street.

Loans and credit cards are both financial products that are sold to you. Before you buy, check that it does what it says on the tin.