When to Choose a Personal Loan Over a Credit Card
When it comes to borrowing money, many people think of 2 options: credit cards or loans. Sometimes it makes sense to get a credit card and have a revolving amount to borrow. However, sometimes it makes a lot more sense to go with a loan. We have a few examples for you to consider.
Borrowing a Large Amount
Sometimes life happens and you need a large lump sum at once. Weddings and home repairs are examples where you may need more than $7,000 or $8,000. While there are high-limit credit cards, we believe a personal loan may make more sense in this situation. A personal loan may provide you with the capacity and flexibility to have a regular, fixed payment and term.
Lower Interest Rate
If we continue the scenario above, the interest rate may make more sense with a personal loan rather than a credit card. Remember, credit cards have revolving interest. Making the minimum monthly payment will take you years to pay off and cost you thousands more in interest. Using a personal loan could provide you with a lower interest rate, a lower payment, and allow you to pay off the loan more efficiently than trying to tackle a large credit card bill.
Debt Consolidation or Pay Off
Personal loans can be an excellent way to curb credit card spending habits, consolidate, and pay off existing debt. Credit cards can be a great tool, but they can also be a weakness. If you have found yourself in a great deal of credit card debt, a personal loan could free you from that situation. A personal loan would provide a steady payment option without the temptation of revolving debt.
Credit cards are not bad. There are certain situations where a credit card makes perfect sense. However, if you need to spend a large lump sum or you’re struggling with interest rates or large amounts of debt a personal loan may be the better option for you. Do your research, weigh your options and make a smart financial decision.
If you believe that you may need a personal loan or you’d like more information, feel free to visit our personal loans page or contact us. We would love to help you get and stay on the right financial track.