Should you use a cash loan or credit card for back to school expenses?

Now that the school year has begun, there are a number of school expenses that many parents are being faced with. School fees, school uniforms, books, and school excursions are just a few that can suddenly add up and cause the household finances to be uncomfortably stretched. Before reaching for the credit card, it's important to consider the benefits of a cash loan. Here are three reasons why they are better than a credit card:

1. Cash loans for school expenses are designed to be repaid

Unlike a credit card which allows you to keep redrawing it back up to its limit, a cash loan is designed to be used for one reason only, and then be repaid and closed. By taking out a loan specifically for school or education expenses, it can be structured to suit your financial position and cannot provide any temptation to be re-used for any other spur of the moment purchases as can happen with a credit card.

2. Cash loans have set repayments so it's easier to budget

Because cash loans are a personal loan, the repayments are calculated at a fixed rate which means your repayments will stay exactly the same for the entire loan. The benefit of this is that it allows you to budget each month exactly what you need to keep aside for your repayment. This is unlike a credit card. As soon as you re-use a credit card the minimum repayment amount changes, and the bank won't specifically work out a repayment amount for you each month to ensure you repay one particular expense. The danger of using a credit card is that the debt may never be fully repaid, so you could effectively be paying off those school expenses for years and years to come. Budgeting is an essential task all households should do. You can either do it yourself using free budget tools, such as those provided on the Goverment's Moneysmart website. If you struggle to manage your own budget, there are services available that have experts help you to complete your budget and even pay your bills for you.

3. Cash loans are simple to understand

When you take out a loan, whether it be a cash loan, car loan or any type of personal loan, there are three main things you need to know. How much you have borrowed, how much you need to repay each month and how long it will take to repay. As long as you understand these terms and conditions and the total cost of finance, then there really can be no surprises. With credit cards there are a lot of things to understand. There are minimum repayments, purchase interest rates, balance transfer interest rates, cash advance interest rates, annual fees and foreign transaction fees to name a few. By taking out a cash loan all you need to do is set up an automatic direct debit for the repayment amount - that's it. As long as you have the money in your account, (we always recommend you set up your repayments in line with when you are paid so you know the money will always be there) then there is absolutely nothing else you need to do. Simple.

It's not only school expenses that cash loans can help with...

Although this article refers to school expenses, it is equally applicable to many other personal expenses if there is a cash shortfall that requires financial help. Whether you need a loan for a car, to pay bills, cover a bond, a holiday or a wedding, before reaching for a credit card we recommend you consider the benefits of a cash loan first. This article has highlighted 3 worthwhile reasons, but there is another one you can remind yourself of. Security. In today's society credit card theft is everywhere, but there is no way a cash loan can be "stolen". So next time you need between $500 and $5,000, please consider a loan with us at Fair Go Finance and forget the credit card option. We are here to help.

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