Bad Credit Loans: A Shield When Your Credit Card Grace Period is Expired

Credit cards are the easiest way to make any transaction when you are running out of money. Unlike short-term loans, you do not need to visit the site of a lender to fill out the application form and wait for the approval. An additional benefit of using a credit card is you will have a grace period to pay off your debt. The grace period is the duration that your credit card company allow you to pay off your debt without incurring interest. Credit card companies allow this period so that you can pay the debt without any interest.

The length of the grace period may fall between 21 and 25 days. However, not all credit card companies allow this period and this does not include all types of transactions. For instance, cash advances will incur interest even if you have no outstanding balance. You will lose your grace period if you either make partial payments or make no payment. However, you can earn it back, but after a long period. Understand this by an example.

Suppose you shopped your clothes worth £500 with your credit card on 1 August and your billing cycle closes on 15th of every month. Since you have the grace period, so your payment due date falls on September 7. Your credit card company will not grant you a grace period if you already carry an outstanding balance, for instance, £200. You will have to make the payment in full along with finance charges. In the absence of the grace period, your credit card company will incur interest and late payment fees. Now your total bill is £700 and the company will incur interest charges on the full amount for a period of 36 days (from August 1 to September 7) plus interest charges on £200 for a period from September 6 to next billing cycle i.e. September 15.

Credit cards seem a cheaper option when you need money urgently, but what if your grace period has expired? Further, missed payments damage your credit standing. It is not wise to use your credit card for any transaction if you have no grace period because the interest will start accruing since the moment you make a transaction. It mounts up with each passing day and may throw you in a debt web. Instead, you should take out very bad credit loans.

How bad credit loans are a solution

There are various direct lenders who allow you to borrow money despite your poor credit rating. The good thing is you do not have to pay off the loan instantly, nor in a lump sum, and you do not need to arrange a guarantor, hence called no guarantor loans. These loans come with a certain duration, for instance, three, six or 12 months depending on the size. As you will pay down a small amount of the debt every month, you can easily manage it without risking your financial situation. These loans can help you tide over when your credit card does not provide a grace period.

Another situation to apply for these loans is when you have been trapped in credit card debt. Credit card interest quickly adds up. The more you delay, the higher the interest will be. Bad credit loans can help you get rid of the credit card debt instantly.

The bottom line

Financial experts suggest that if you use your credit card and do not make payments on the due date, you will not only incur interest and late payment fees but also increase your credit utilization ration, which means excess reliance on debt. It will lower down your chances of getting a loan at a better deal down the road.

Therefore, you should make only those purchases with your credit card that fall within the grace period. Make sure that you will settle your credit card bill within this period. When you need a large amount of money, you should prefer taking out loans even though you have a grace period because you can settle the whole of your debt in multiple installments.

Whether you apply for a credit card or a loan, make sure that you know the interest rate the loan company will charge in case of default. The length of the grace period differs from company to company. Make sure that you have researched well.