Have you been looking for a quick source of cash to fund your financial needs? And you’ve been wondering whether to go for a credit card or a personal loan. Personal loans and credit cards are both good options for getting cash infusion for your financial needs. But, which one is a better option?
First, let’s take a quick look at what these loan options are: A personal loan is an unsecured loan (requires no collateral) that provides a solution for immediate financial needs. It is a type of loan that offers flexibility regarding use. You could use it for a medical emergency, vacation, home renovation and so on. Credit card loan is one in which a credit card is issued to loan money to an applicant which is to be repaid at a later date with a particular interest rate.
Why are Personal Loans a Better Option?
Easy to apply
Personal loans are relatively easy to apply, compared to credit cards. What more, you can get a quick decision as to whether your application for a loan has been approved or declined. If you have been accepted, your unexpected medical or car repair bill can be paid in a matter of days. If you don’t own any assets and need a lump of cash to finance something, you have a massive chance with personal loans. Most personal loans, unlike a credit card, do not require you to provide collateral or security before applying for a loan.
Interest rates don’t fluctuate
The personal loan offers you a fixed lump sum of money over a period. This amount of money comes with an interest rate that is always set. This means over the duration of the loan term, you are assured of stability in the price you are going to repay. So once you sign the agreement, you leave with a fixed rate in mind without the fear of the interest rates being jacked up.
Fixed payments allow for a monthly budget
The change in payment rates associated with credit cards can be easily bypassed with the use of personal loans. This repayment schedule lets you get a definite beginning and ending to knocking out your debts. If you are someone on a fixed income, repaying a personal loan could be a breeze for you. This way, you can create and stick to a monthly budget since the payments you make each month remains the same. Worries over meeting minimum monthly payment will be almost non-existent.
The interest rates are substantially lower
Personal loans have a lower rate of interest compared to credit cards. Well, if you are willing to shell out 19% on a credit card loan, then you can go ahead. However, if you need cash right away which you can repay over the years at a great interest rate, then you should go for personal loans.
Allow for debt consolidation
A personal loan can help you pay off your debt much faster through debt consolidation. Since personal loans have a lower interest rate than credit cards, you can clear your credit card debts at a lower interest than your existing credit card interest rate.
You should start considering the more traditional personal loans over credit cards when you don’t have ready cash to make a transaction. Also, if you don’t have any assets and have a pressing need for money, you should go for a personal loan.