Is a Personal Loan Better Than a Credit Card?

There are two great options to finance a big purchase. You could use your credit card, just charge the item, and pay it off over time. The other option is to take out a personal loan.

The second option requires a bit more. First, an application needs to be filled, then get approved. But the extra steps don’t make this a bad option at all, this is a great approach for covering purchases costs in many cases.

Which financial option should I choose? Here are 4 signs that will show you a personal loan is a better choice.

Qualify For Lower Interest Rate

When taking a loan, you want to pay the lowest possible amount of interest. Some banks offer credit cards with no interest on purchases, if that’s your case, then it’s an excellent way to go.

But if you don’t qualify for one, then a personal loan with low fixed interest is your go-to option. It will allow you to pay the least amount possible.  

You Need A Large Amount Of Money

If the amount you need to borrow is extremely large, then is hard for a credit card to have access to such a large line.

An easier way to go is a personal loan. It depends on your credit score and income, but you are more likely to get a loan.

Paying Back Takes Time

Personal loans are most likely to have long repayment timelines, they can go up to 30 years, meaning you’ll have enough time to pay back. Also, the payments start to lower as the end comes close.

But if you use your credit card and require a long time to repay, chances are your credit card will expire before you are debt-free.

Want to Know The Total Cost?

Personal loans with fixed interest rates are predictable. Before you borrow the money, you’ll know exactly what you’ll be paying every month, and of course when you’ll be debt-free.

But with credit cards, it’s not the same.

Credit cards allow you to make minimum payments as you keep charging more, so it might be hard to keep track of your numbers.  

Before you decide which way to go, just consider that everyone’s needs and financial situation are different. So take your time, check your options and go with the best one.