You’ve found yourself in a delicate money situation that requires assistance. After weighing the options, among the numerous options that exist in the world, you’ve narrowed your findings down to two solid options. You must decide between the credit card and the personal loan? And even after making a list of pros and cons, you’re
You’ve found yourself in a delicate money situation that requires assistance. After weighing the options, among the numerous options that exist in the world, you’ve narrowed your findings down to two solid options. You must decide between the credit card and the personal loan? And even after making a list of pros and cons, you’re still uncertain as to which one will offer you the financial relief you desire.
Making money matters worse is not the objective here. Under financial duress, it’s best to think logically, stay calm, and evaluate the situation with plenty of time. In most cases, it’s always best to seek an expert.
Why Do You Need Money?
First things first, we must understand you need for greed, eh hem, money. This will help narrow down the decision.
If you need money for a short-term financing, something like a large purchase or bill/service, the credit card might suit you better. Why? Because credit cards are best suited for purchases when they come with bonus or reward programs; often times, customers accumulate points for large purchases and then use those points to their benefit. If you are part of a rewards program and the purchase is large but not exorbitant, then the credit card would be the best option for you. Be sure that you are, in fact, part of a rewards program and if you’re not, inquire with your credit card how you could be affiliated.
If you are looking to purchase something larger, say a house or a car, or if you need a large sum of money to start a business or for surgery, then the personal loan will be the wiser choice. Why? Because with large venture comes slower payback times and personal loans are known to have more amicable interest rates than credit cards. Since a large loan will take longer to pay, your best bet is to select a loan that won’t gouge you in APRs.
Secured or Unsecured?
Most, if not all, credit cards are unsecured loans meaning that they are not supported by any collateral. However, personal loans can be either secured or unsecured; you will have to inquire about this at the time of the borrowing and make sure that you meet the personal loan requirements are receiving a fair interest rate that should be based on your credit score.
For some of you this won’t matter much, but it should be part of the discussion when it comes to going for credit or obtaining a loan.
Terms and Revolving Credit
Credit cards do not have terms which means you are given a spending limit and each month you pay back on that limit along with an interest rate. These ongoing payments keep your account active and give you a good credit reputation. The credit is revolving which means you will always have a certain limit available to you.
Personal loans have terms that are defined by the lending agency or office and usually start at one year and can go up to seven years. These ongoing payments continue until the balance returns to zero. Personal loans are not revolving credit because the amount borrowed decreases as the monthly payments are collected.
So when it comes to borrowing, there are some questions to ask in order to arrive at the safest most plausible financial decision for you, your lifestyle, and your borrowing needs. Take your time, don’t rush –when venture is involved it’s best not to be too adventurous. When it comes to making decisions the wise person doesn’t jump the gun. After all, you don’t want to make a mistake that requires bigger borrowing limits down the line.