Credit cards vs Loans, which way to go?
Credit cards have become such an everyday thing in our lives. It is so common that we forget that they are a type of short term loan. And with high interest rates as well. When you do not have the money to make purchases or spend for a sudden need, there are two ways that you can go for.
– Credit Cards
– Personal Loans
Both of these methods come with their own pros and cons. However, it is important that you have a good understanding about both methods before you use either of them. When used wisely, both of these methods will be able to make you a savvy and financially sound person.
Let us start with the option that most of us have in our pockets. More often than not, we get offers and reminders to use our credit cards. We are often given attractive promotions which urge us to spend more. However, it is important that you understand that spending your credit means that you are spending money that you do not have. It comes with a high cost!
Credit is ideal for purchases that you can completely pay off within the time period allowed through the card. By purchasing and paying off fully without keeping any debt under your name will ensure you have a clean credit history . This will benefit you largely in other areas of life as well. The biggest disadvantage with credit cards come if you are not able to pay your debts off on time. This leads to building up high amounts of interest. Which will make it extra difficult for you to get out of debt. Unless, you find a way to pay in bulk and clear the outstanding amounts.
Personal loans are the way to go if you need a fairly large amount of money that you wish to pay off within an extended period of time. These loans also come with a higher interest rate. However, they are more flexible and are lower than credit card rates. The difficult side here is that you need to go through a lengthy process in order to prove to your bank that you have enough financial capability to pay off your loan. Otherwise, your loan application will likely not be approved. But you do not have to face when getting a loan through your credit card.
The payoff term for a personal loan is usually between 2 to 5 years, which you can select according to your capability. There is a fixed interest rate and you can also pay it off earlier than the agreed term if you can manage to do it.
Taking all the above facts into consideration, the final verdict is that both methods come in handy as long as you use them in the right way at the right time. Use your credit card for small purchases that frequently happen which you can pay off within a short period of time. If you need a large sum that you need a considerable time to pay off, then opting for a personal loan is the way to go!
If you are in need of cash right now and unable to get one from banks, consider getting a loan from licensed moneylenders! Have a look through our list of moneylenders to find one suitable for you. Be wary of cold calls or SMS offering loans! Those are all illegal moneylenders aka loansharks.