When it comes to financing larger expenses, one usually opts for either a credit card or a personal loan. On one hand, both the methods are similar in that they allow users access to a certain amount of money that they need for personal use. On the other hand, they are different in terms of their payment methods, applications and rates.
Despite the varying views of individuals, the consensus says that a personal loan can serve to be better and more useful than using a credit card. For all those who do not understand why a credit card isn’t as good as a personal loan, here are a few benefits that a personal loan allows, and a credit card doesn’t.
No Bank Account Necessary
While maintaining a bank account may help you manage your finances, having one isn’t necessary for getting personal loans. For a credit card, you may apply without a bank account but the chances of your application being approved are bleak. In contrast to this situation, a personal loan application is considerably easier, requiring a lot less input.
More Lenders Available
Credit cards are mostly associated with banks. While you can get more than one credit card from the same bank, there are not as many sources for credit cards as there are for personal loans. Every bank that gives credit cards, can also provide with personal loans, including the number of other lenders that give out personal loans.
Easier Budgeting
With a credit card, you do not have a fixed amount of time to pay off your debt. As long as you pay the minimum amount every month, you are good to go. While this may sound feasible, this can land you in huge debts with no budgeting to help you out.
A personal loan requires you to pay a fixed amount of money each month, over a fixed period of time. With this fixed payment plan, budgeting your debts becomes a lot easier. It allows you a surefire way of getting out of debt.
Fixed Payments
As mentioned above, the payments with a personal loan are fixed for each month. Whereas, with a credit card, you have to pay, more or less, two percent of your debt each month. Since the payments are fixed in a personal loan, you do not need to calculate the amount to pay each month. It will be constant throughout your loan term.
But with a credit card, you will have to pay a different amount each month, depending upon the amount you have used. If you lose track and overspend, you may need to pay more than you had expected and were ready to pay.
Great Credits Are Not Necessary
When you apply for a credit card, you will find that you are only eligible for good, affordable interest rates if you have good credit. Without sufficient credits, the interest rate is too high to be considered.
If you apply for a personal loan, you can get good rates, regardless of your credits. So if you find yourself struggling to maintain your credits and are looking for financial aid, a personal loan would suit you better than a credit card.
Lower Interest Rates
The interest rates provided by credit cards and personal loans are lesser than those for other loans. When comparing the two, personal loan rates are even lesser. If you are looking to consolidate your debts, a personal loan would be a better option since it would ask for a lower interest rate.
Get A Higher Amount
It is a very well known fact that users can get a greater amount of money through personal loans than they can with a credit card. The average amount easily given out by lenders, as personal loans, goes up to $50,000. While some other lenders may allow more, this amount is already a lot more than the average credit card loans. So if you are planning to invest in large expenses, a personal loan would be more suitable.
Cash Is Accepted Everywhere
With a personal loan, you can get the amount that you need in cash. No matter where you decide to spend the amount, you will be good to go, since cash is easily accepted everywhere. Unfortunately, the same isn’t true for credit cards. While most outlets, organizations and individuals in the present day accept card, there is still a great number who deal in cash only. So a credit card won’t work in every situation.
No Risk Of Going Over The Limit
While using a credit card, its very easy to lose track and hit the limit. Crossing this limit would either result in a refused transaction or extra charges. According to a survey, about 20% of the users hit their credit card limit in a year. This percentage has increased by another 15% in the recent past.
With a personal loan, there are no such issues. You simply apply for a decided amount and are handed that amount. With the money in hand, or in the bank, losing track of it is not as easy.
Greater Security
A credit card is the key to all the credit that you are entitled to. It is just a piece of card, which, if stolen, can have great consequences. You may not only lose all the money but may also be held accountable for the purchases made. With a personal loan, users are at no such risk. All their amount is in cash or in the bank which is not as easy to lose.
Reduced Risk Of Scams
Scammers are everywhere. Wherever money is concerned, individuals are presented with the risk of being scammed. This risk is however not as great while dealing with personal loans. All one needs to do is make sure they are dealing with an accredited lender, and they’ll be good to go. With a credit card, however, the risk does not end there. There are many other ways a scammer could get the money out of a credit card, which is why they are not as safe.
Conclusion
On a superficial look, using a credit card may seem the same as getting a personal loan. The truth is nowhere close. A personal loan is not only easier to apply for and more secure, but it is also a lot better in terms of paying off debts as well as interest rates.
There may be a few cases in which using a credit card may be more feasible for some users, but in general, where larger expenses and paying off debts are concerned, personal loans will always be considered to be better.
