Comparing and contrasting all potentially borrowing options before making a decision is just plain smart. There is no reason to make any financial decision in a hurry if you don’t have to. When we hurry we are more likely to make mistakes, and that is just not acceptable. Today, we look at the differences between a credit card and a personal loan. Which one should you borrow if you end up requiring some money right now?
Credit Cards: What Do We Know About Them?
You have undoubtedly received numerous credit card offers over the course of your lifetime. These things pop up in the mail constantly, and most of the time they are not solicited at all. That is why many people are more familiar with credit cards and think of them first when they think of borrowing options available to them.
Credit cards are more familiar to many, but that doesn’t mean that they are the superior option. A credit card is a revolving debt. This means that any time you carry a balance on it you are charged interest on that remaining balance until it is completely paid off. This can get costly for those who don’t take the opportunity to pay off their credit cards completely.
It is easy to start with one credit card and suddenly end up with a lot more than that. Most people have no intention of getting themselves dug into a financial hole obviously, but it is fairly easy to end up there regardless. Thus, it is always important to keep an eye on your credit cards and perhaps not get them at all if you don’t think you can manage that.
Personal Loans: How Are They Different?
We have looked at credit cards and the reasons why they could have pitfalls that you don’t want to fall into. That begs the question, what makes personal loans so different? Isn’t this just another form of borrowing that acts in much the same way as a credit card? It is easy to see why one might think this, but it just isn’t the case. A personal loan really is different from a credit card in a myriad of ways.
A personal loan is a set amount of money borrowed for a set period of time. This is not a revolving line of credit like the credit card is. Instead, the payments and the amount borrowed are set ahead of time. It allows the borrower to know exactly what they need to pay back over time to free themselves from this debt. A lot of people prefer that certainty to an unclear amount owed on a credit card.
The money that one receives from a personal loan comes in the form of real cash in hand. In other words, the borrower takes this money out and receives it directly into their bank account. They don’t have to make payments off of a card like they do with a credit card.
Another nice thing about an online personal loan is that they may be borrowed via the computer and deposited into your bank account as soon as the next day. When one applies for a credit card it is necessary to wait at least until that card arrives in the mail before it is ready to be used. That is simply unacceptable for those who are in dire need of cash for an emergency expense now.
Which Should You Choose?
Everyone has their own individual financial circumstances to worry about, but it is fairly clear that the average person should be focused on getting a personal loan over a payday loan the vast majority of the time. The reason for this is because they obviously want to gain all of the advantages already mentioned above. Why take a chance with a credit card when you don’t even get all of the benefits that a personal loan has and you have to pay a high interest rate regardless.
People deserve the opportunity to review all potential borrowing options before settling on a final decision. Choosing between a personal loan and a credit card is one way that someone can begin to take a few steps in the right direction with their finances.
