A Comparison Between Personal Loans Between Credit Cards

Before you decide that a personal loan is the best route to go, consider how you’re going to use the money. Will a credit card provide more flexibility in your budgeting? Both personal loans and credit cards let you access funds, but the difference is that with a personal loan, you get a lump sum of money that you repay on a monthly basis until your loan balance reaches zero. In comparison, a credit card provides you a line of credit and a revolving balance that is based on your spending.

If you are unable to decide if you should get a personal loan or a credit card, this guide will be of help.

When Should You Use a Personal Loan?

A personal loan is an excellent option for people who

Qualify for a competitive rate

Want to consolidate several high-interest debts

Need to pay for a large, one-time expense

Prefer to repay the debt every month over the course of the loan term

Pros of Personal Loans

They typically have a lower rate of interest in comparison to credit cards

Fixed monthly payments can make it easy for you to budget

Lenders offer fast funding and you can get your hands on a relatively large sum of money easily

Cons of Personal Loans

People with low credit scores will have to pay a higher interest

There is no flexibility in terms of monthly payments

When Should You Use a Credit Card?

A credit card is a great option for you if

You need to pay for smaller expenses

You are certain you can repay your balance in full every month

You qualify for an introductory 0% APR loan

Pros of Credit Cards

You can use a credit card whenever you need to, provided you haven’t reached your credit limit

You can make interest-free purchases if you repay your credit card balance in full every month.

People with good and excellent credit scores may be able to access rewards

It may be easier to qualify for a credit card with a fair credit score, in comparison to a personal loan

Some cards offer an interest rate of 0% for an introductory period

Cons of Credit Cards

Some cards have annual fees

You can amass debt if you don’t repay your balance every month