Credit cards and personal loans are lines of credit with different pros and cons. While credit cards are revolving lines of credit, personal loans on the other hand, are paid at the at the beginning of the term. You then make ongoing payments over a specific time period to repay the loan in full.
Credit cards don’t come with terms, but you need to repay a percentage of whatever you spend each month.
Similar factors lie in the fact that both are forms of credit and both require a monthly repayment. Credit cards favour annual fees while loans favour monthly service fees.
Which option is better between using a credit card versus getting a loan?
Benefits offered by credit cards:
Owning a credit card gives you the benefit of having immediate spending power. Credit cards are also ideal for if you need a constant cash flow. Mist credit cards also come with favourable rewards programmes, making them an enticing choice for many consumers.
One the downside, credit cards come with higher interest rates. The debt can roll on and on and as a result, without enough discipline, you may find yourself caught in a debt trap.
What are the advantages of getting a personal loan?
Personal loans come with lower interest rates compared to credit cards and they may work out to be cheaper in the long term. This type of debt also comes with an end date, so you know exactly how much you need to repay as well by which date.
One of the disadvantages associated with getting a personal loan is that it may not be very easy to qualify for one.
Making the decision of choosing which is better between a credit card versus getting a loan, can be based on a number of factors.
You first need to ask yourself why you need the funds and how much you are looking to borrow. You also need to consider how disciplined you are with repayments, while also taking into account factors such as interest and fees, considering your financial standing.